A small EV charging company reported a massive earnings beat after the bell on Wednesday. 

The next day it gapped up over 30%.

Finding overnight gappers is the easy part…

Trying to gauge whether or not a stock will keep ripping (in real time) is a dangerous game. 

And when a stock moves that violently, you have to wonder how much more it has left to run. 

Waiting for the chart to show you one way or the other means you will likely miss the majority of the move.  Or worse, you end up buying the top.

There’s no sense in trying to catch a moving train. 

So stop trying to be Tom Cruise…

When a major catalyst like earnings produces a big move, there’s a trade you can hunt for on the sympathy names in that sector.

The tell is quiet enough that simply sorting your screen by percentage gainers will never put it in front of you.

But the setup is easy to find, and simple to execute.

You probably won’t immediately enter a new tax bracket from nailing one of these trades.

(The gains usually aren’t as juicy as the moving train) 

But these are reliable and consistent setups you can look for after any earnings beat.

The Sympathy Setup

ChargePoint Holdings, Inc. (NYSE: CHPT) opened up almost 33% Thursday morning.

The move came directly after a Wednesday evening earnings report that clearly impressed the market.

The stock closed up 75% after that impressive opening bump. This is a rare case where anybody jumping on that train caught a nice little payday.

But the story is about the other two names that moved that afternoon.

Two names gapped up 2.5% on the news that morning. Blink Charging Co. (NASDAQ: BLNK) and EVgo, Inc. (NASDAQ: EVGO), and neither one had news of its own.

Compared to CHPT’s 33%, that might sound like a non-story…

But for the sympathy names, a 2.5% bump is a big tell that traders have identified them as follower stocks.

The second tell is how much volume traded that first bar (compared to its average volume).

BLNK’s first five-minute bar traded 1.67x its usual volume.

EVGO’s traded 4x.

You don’t buy the low. The tell has to print before you can act on it, so you’re in after the first candle, not at the bottom of it.

BLNK gave you +10% from there, over almost five hours.

EVGO ran about 9.9%, and took six hours to do it.

The problem is there’s just not enough meat on these moves to be late to them. So you only get a candle or 2 to make up your mind. 

That means you have to set a TIGHT stop right below your entry. 

If you get stopped out, the cost should be negligible. And usually, when a chart puts in a new low that early in the session, it’s doomed anyway.

How To Find The Next Ones

As soon as you saw the bullish report by CHPT on Wednesday night, your first move should have been to identify those potential followers.

Make a list of the sympathetic names in that sector with their average volume next to them.

Then use every monitor you have to watch the first candle on each of them at the opening. The ones that gap up with extra volume are the ones you’re after.

Wait for the second candle. If it’s putting in a new high, that’s your trigger to buy (and the line to set your stop).

These are the kinds of strategies you will learn every week with Trade Signals.

Stay Sharp,

Jack Kellogg

*Past performance does not indicate future results