Stocks in Play

A Comprehensive Guide

How to spot, enter, and manage stocks in play!

By Shashank Vemuri
Table of Contents

1. What are Stocks in Play (SIPs)

2. Understanding News
3. Types of SIPs
4. News that could lead to SIPs
5. The edge behind SIPs
6. Finding SIPs
7. Resources to Find SIPs
8. Determining the Best SIPs
9. Episodic Pivots (EPs)
10. Determining the Best EPs
11. Situational Awareness Effect on SIPs
12. Entering SIPs
13. Sizing SIPs
14. Exiting SIPs
15. Examples of Recent SIPs
16. Sources
What are Stocks in Play (SIPs)?

Ever since the inception of the stock market, news has been one of the fundamental factors for
causing stocks to go up or down.

The idea behind stocks in play is to try and identify the stocks that have significant recent
news behind them, and exploiting the price movements they make as a result.

By studying how different news can impact a stock, you can develop a highly profitable setup on
any timeframe with a real edge.
 Understanding News

News moves stocks in the short term and long term.

Two types of news happen daily:

● Scheduled news are all released at a previously determined, fixed frequency. Examples include
earnings releases, short interest data, and insider buys and sells
● Unscheduled news are entirely unexpected for the market/public. Examples include CEO or
management change, new product launches, and shortages

Both types of news can move stocks but unscheduled news tends to lead to more explosive, short-term moves
as it truly surprises the market.

Bottom of the line – stock reaction to the news is an inherent structural tendency of markets.
Learning how to trade based on the different types of news can be a strong edge.
 Types of SIPs

There are primarily 3 different types of stocks in play.

● Earnings-related news
● Other news (related to company, industry, macro, etc.)
● Delayed reaction to the news

The stocks that move the biggest based on news are

Earnings moves are the second biggest SIP
biotechs.
opportunity.
Biotech SIPs can make anywhere from 20 to 100%
Stocks can make 20 to 40% moves on earnings on
or more in one day on enormous volume (10M to
100M+ shares traded) the day of earnings alone.

Biotech stocks that have a huge day on 25+ million Many of the biggest winners in history started their
volume tend to have a solid second move after moves with an EP with an earnings-related catalyst.
consolidations.
News that could lead to SIPs
There are countless news events that could lead to SIPs. Here are some of the most common.

● Earnings
● Biotech catalyst plays (FDA approvals, drug breakthrough etc.)
● Analyst upgrades and downgrades (some analysts matter more than others)
● Analyst price target changes
● Government policy changes
● Management changes
● Product launches
● Insider buying
● Fraud
● Wars, natural disasters, disease
● Activist investor stakes

Careers can be made by just focusing on these news events and their subsequent reactions.
The edge behind SIPs

Understanding and tracking the impact

of news on stock moves can give you a
big edge in the market as they often
trigger short-term moves.

Stocks in play is a setup idea that

capitalizes on this news breakout
phenomenon.

Developing an edge on trading news

plays gives you daily opportunities as
there will always be some new surprise
for the market/stocks to react to.
259 stocks in the past year gapped up by >8% and then proceeded to
close 10% above open. (o/c1 > 1.08 and c/o >1.1)

Safe to assume many of these moves were because of news due to the
sizeable gap ups
 Finding SIPs

As discussed, news released after hours or pre-market can move stocks during the market hours.

Thus, developing a process to track news daily before and after market hours is a must for those who
want to trade stocks in play.

Every evening, look for any significant news that led to after-hours activity in a particular stock.

Likewise, every morning, look for any significant news that led to premarket activity in a particular
stock.

Once you start tracking news daily and the subsequent reactions to the news, you will develop a good
intuition about how to trade these SIPs.
 Finding SIPs (Biotechs)

As mentioned previously, biotech stocks are some of the best opportunities for SIPs because of the
explosive potential moves they can make.

However, they are often due to catalysts that are different from stocks from other sectors.

Biotech stocks have four main catalysts that impact prices.

1. Drug trial news

2. FDA approvals
3. Industry conference presentations
4. Earnings

If you want to trade biotech, you must track these four dates.
 Finding SIPs (cont.)

Sometimes stocks will not move much after-hours or premarket with respect to their news.

For example, in 2021, Avis Budget Group (CAR) gapped up 2% after reporting earnings and
proceeded to finish the day up 108%.

Scanning the list of stocks reporting earnings AMC and BMO every day and keeping an updated
daily list of these tickers will make sure you are aware of intraday moves.

Another way is to scan for high volume and large percentage moves during the first 10 to 15 minutes
of market action. Oftentimes, the stocks making incredible moves are doing so based on some news
and can be strong SIP candidates.

The key is to find and enter as early as possible (while managing risk).
Resources to find SIPs
Price Action:

● WSJ Extended-Hours Movers: https://www.wsj.com/market-data/stocks/extendedhours

● Market Chameleon Premarket Movers: https://marketchameleon.com/Reports/PremarketTrading
● Market Chameleon After Hours Movers: https://marketchameleon.com/Reports/AfterHoursTrading

News:

● The Fly Significant Stock News: https://thefly.com/news.php

Earnings:

● Earnings Whisper Daily Email Newsletter: https://www.earningswhispers.com/members-sign-up

● Earnings Whisper Earnings Calendar: https://www.earningswhispers.com/calendar/
● Zacks Earnings Report: https://www.zacks.com/earnings/earnings-reports

Price Targets and Analyst Ratings:

● Market Beat Ratings: https://www.marketbeat.com/ratings/

Biotechnology:

● BiopharmIQ Catalyst Calendar: https://app.bpiq.com/catalyst-calendar

● Biopharmcatalyst FDA Calendar: https://www.biopharmcatalyst.com/fda-calendar
Determining the Best SIPs

Any stock moving on news is technically a SIP, however, the best stocks in play that you should focus
on have a few things in common.

1. High volume - oftentimes 2-3x above average volume and above 9M shares traded
2. Big catalyst - a drug gaining FDA approval or solid earnings. A strong enough reason for the
stock to continue rising from the open (or falling if bearish SIP)
3. Some neglect - SIP should be starting the first or second leg of the move, otherwise the gap
might be an event to take profits into
4. Have continuous momentum from the first minute of trading

The end of this presentation contains examples that have all four!
Episodic Pivots (EPs)

Episodic Pivots are the ultimate stocks in play, with game-changing news that can launch the stock into
a rally for several weeks, months, and even years.

A high quality EP only occurs only a few times every year.

Most stocks in play do not have the catalyst to sustain moves past one day or a few days.

An EP is an SIP that has enough catalyst to prolong the buying for much a longer timeframe.
Determining the Best EPs

Two acronyms to help distinguish EPs from SIPs are MAGNA53 and CAP10. Here’s what they
mean.

● MA – massive earnings acceleration, sales acceleration, or earnings surprise

○ greater than 100% plus EPS growth, revenue, or forward guidance on meaningful terms
● G – gap up of at least 4% plus with at least 100k volume in after hours or pre market
● N – neglect or base of few months to years
● A – sales acceleration of 25% plus preferable or 29% plus sales growth 2Q in a row.
Earnings growth without sales growth could be due to cost-cutting, not growth
● 5 – Short interest ratio greater than 5 (optional, nice to have)
● 3 – 3 plus analyst upgrades and price target raised (optional, but nice to have)
● CAP10 – Market capitalization below 10 billion
Determining the Best EPs (cont.)

The best episodic pivots have some type of neglect prior to their news event.

Here are some common types of neglect:

1. Financial neglect: A long period of time where company had no earnings/sales growth
2. Price neglect: A long period of time where stock price had no meaningful rally
3. Volume/liquidity neglect: A long period of time where stock had below average daily volume
4. News/attention neglect: A long period of time where company had no analyst coverage
and/or no major news
5. Ownership neglect: The fund ownership is low, institutions are not involved yet

A long period of time can be anywhere from several months to years. The longer, the better.
Situational Awareness Effect on SIPs

Stocks in play both to the upside and downside occur every day because news is constantly
coming out.

However, the expected magnitude and duration of these SIPs moves can be dependent on the
overall market environment and situational awareness.

If the market environment is bearish or choppy, bullish SIPs (depending on quality) might have a
tendency to fade or just not have as much follow-through as if it was a bullish environment.

Vice versa with bullish market and bearish SIPs.

It is essential to use your situational awareness and best judgement on whether to treat SIPs as
only day trades while aggressively taking profits into strength or hold core positions for
swing/position trade moves, given they have a quality-enough catalyst.
Entering SIPs

There are countless ways of entering stocks in play, depending on the quality of SIP, risk tolerance,
setup preference, and timeframe.

Here are a few ways of buying stocks in play.

1. After Hours or Premarket

a. High risk/reward and hard to manage risk effectively with lack of liquidity
2. Opening Price Guarantee (OPG)
a. Can enter at opening price with percentage or dollar stop and then observe action
b. Less risky than extended hours trading but move may fade right off the open (gap and crap)
3. Opening Range Breakout (ORB)
a. Can enter as stock breaks out of 1 min, 3 min, 5 min, 15 min, or 30 min bar high. Stop at LOD.
b. Will miss initial, potentially explosive gains, but move has breakout confirmation so not as risky
4. Lower Timeframe Continuation Setups
a. 2LYNCH type continuation breakout on lower timeframe. Stop at MOD.
b. Works better for delayed reaction to SIP
Sizing SIPs Trades

Regardless of entry tactic, position sizing is a function of total risk percentage.

Depending on the stock, industry, significance of news, market conditions (SA), and other factors, you
can decide on the amount of total portfolio risk you are willing to take.

In a scenario where entering XYZ stock at $20.00 after opening range breakout on 5 minute timeframe,
with stop at $19.00 low of day, the individual trade risk is 5%.

If willing to take 1% total portfolio loss on the trade based on the factors mentioned above, the
maximum position size for XYZ is 20% of account.

SIZE MATTERS. Try to find low risk, logical entries to maximize size potential.
Exiting SIPs

Many stocks in play fade after explosive buying within the first couple of hours.

As a result, it
is essential to find/enter as soon as possible and be aggressive with
taking profits into strength.
Unless research suggests move might turn into longer-term rally, more than 80% of the stock bought
should be sold on strength from risk multiples during the first day or two. Find free money.

For higher potential trades in which you already have a profit, you can exit on trailing stops either using
moving averages, new support/resistance areas, or dollar/percentage amounts.
Exiting SIPs – An Example

Example – Buying 500 shares of XYZ stock at $20 after ORB on 5m with stop at $19 (50% size)

● Stock moves favorably to 21. Sell 100 shares (now 80% original size)
● Stock moves to 22. Scale out of another 100 shares (now 60% original size)
● Stock moves to 24. Scale out of another 150 shares (now 30% original size)
● Stock closes near High of Day at 25. Scale out of another 50 shares (now 20% original size)
● Give room to 10SMA, over next few sessions stock falls back down to 20. Sell last 100 shares.

Total Profit: 11.5% on trade or 1150 dollars with 5% original risk.

Portfolio Gain: 5.75% portfolio gain on 2.5% portfolio risk.

 Examples of Recent SIPs
GreenPower Motor Company (GP) Daily Chart

GP gapped up 25% after earnings release.

GreenPower recorded record 255% revenue growth QoQ, nearly 100% growth in annual gross profits, and
220% growth in delivered vehicles. In EV sector with less than 100M market cap.
Examples of Recent SIPs
GreenPower Motor Company (GP) 3min SIP Day Chart

3 min ORB entry at 4.77, stop at 4.5 (5% risk)

High of Day – 6.05 (27% profit potential)
Close of Day – 4.99 (5% profit)
 Examples of Recent SIPs
BridgeBio Pharma (BBIO) Daily Chart

BBIO gapped up 47% after positive drug study.

BridgeBio announces consistently positive results from Phase 3 ATTRibute-CM study of acoramidis
for patients with transthyretin amyloid cardiomyopathy (ATTR-CM)
Examples of Recent SIPs
BridgeBio Pharma (BBIO) 3min SIP Day Chart

3 min ORB entry at 27.84, stop at 26.76 (4% risk)

High of Day – 34.16 (24% profit potential)
Close of Day – 32.76 (16% profit)
 Examples of Recent SIPs
JOBY Aviation (JOBY) Daily Chart

JOBY gapped up 10% after Securing FAA Permit

Joby Marks Production Launch, Receives Permit to Fly First Aircraft Built on Production Line
Examples of Recent SIPs
JOBY Aviation (JOBY) 5 min SIP Day Chart

5 min ORB entry at 7.4, stop at 7.09 (4.3% risk)

High of Day 1 – 9.17 (24% profit potential)
Close of Day 1 – 32.76 (16% profit)
High of Day 2 –11.98 (62% profit potential)
Examples of Recent SIPs
Greenbrier Companies (GPX) Daily Chart

GBX gaps up 17% on earnings release

Greenbrier reported earnings surprise of 70% and topped revenue estimates by 10%
Examples of Recent SIPs
Greenbrier Companies (GPX) 5 min SIP Day Chart

5 min ORB entry at 39.75, stop at 38.45 (3.5% risk)

High of Day – 44.67 (12% profit potential)
Close of Day – 43.08 (8% profit)
Sources

https://stockbee.biz/video/2022-10-07-surprising-news/

https://stockbee.biz/tweet/562427/

https://stockbee.biz/blog/2022/11/key-insight-stocks-in-play-sip/