Gap-Up Entries: When to Buy, Wait, or Reduce Risk
Good day Pat,
I\’ve been reviewing my 2025 trade log and gap-ups are my biggest area of loss — not from poor stock selection, but from entry timing and conviction management.
I\’d love your perspective on two specific scenarios:
1. BABA (Feb 7, 2025) — Gapped up on earnings but closed poorly on the day. Conviction was low to hold overnight, yet the stock ran ~35% from Feb 10th onward. How do you approach an entry when a gap-day candle closes weak — do you wait for a defined follow-through signal, or is the answer to size down and accept the intraday volatility?
2. HOOD (May 8, 2025) — Gapped just above a flat consolidation zone. Less clear whether that warrants an immediate entry or a wait-and-see approach given it\’s not a decisive breakout.
My underlying question is: what is your mental framework for distinguishing a gap worth entering on day one versus one where patience is rewarded? Is it primarily a volume + close-position read, or are there other filters you apply?
Appreciate any insight — this has been a consistent blind spot for me and I want to fix the process, not just the individual trades.
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