When a stock drops significantly, we Found an Edge
The financial markets are in a state of flux.
For many, such volatility spells disaster.
But for savvy market players…
It’s a different story altogether.
Why?
Because market turbulence creates inefficiencies, and inefficiencies breed opportunity.
And today, in just a few hours, I’m revealing a strategy designed to capitalize on these exact market swings.
It’s called The Gift Gap, and it’s so powerful that I’ve decided to host a FREE SPECIAL TRAINING EVENT at 2 p.m. ET to share it with you.
There are numerous strategies out there, but The Gift Gap stands out for its simplicity and effectiveness.
Understanding the Gift Gap Strategy
The Gift Gap strategy zeroes in on a particular market inefficiency: the tendency for price gaps to get filled.
When a stock drops significantly, creating a gap in the chart, we’ve found there’s a high probability that the gap will be filled. That’s our edge.
My team and I have put The Gift Gap strategy through rigorous backtesting, and the results are nothing short of stunning:
- Over a 10-year period, we analyzed 3,735 gap down events.
- When targeting a 25% gap fill, our win rate was a staggering 97.11%.
- That means out of those 3,735 trades, 3,627 were winners.
- The average winning trade lasted just 4 days.
- Even more remarkably, 80% of these winning trades hit our target within the first two days.
And right now, I’m seeing a Gift Gap opportunity in Ally Financial (ALLY)
The Gift Gap in Action: Ally Financial (ALLY)
Let’s apply this strategy to a recent market event: Ally Financial (NYSE:ALLY). Here’s the breakdown:
The Gap Event:
Date: September 10, 2023 (following weak earnings and credit concerns)
Previous close (September 9): $39.66
Gap down open: $35.41
Intraday low: $31.95
Closing price on gap day: $32.67
Current Situation (as of October 1, 2023):
Current trading price: $34.66
Potential gap fill target: $39.66
This scenario aligns perfectly with our Gift Gap strategy. Let’s break it down…
Gap Size and Fill Potential:
The gap from $39.66 to $34.66 represents a $5.00 drop (12.61%). Our strategy typically targets a 25% gap fill, which in this case would be around $35.91. ALLY is currently trading at $34.66, which means it has not yet begun to fill the gap.
Upside Potential:
With the stock currently at $34.66, we’re looking at a substantial potential upside. A move towards filling the gap could unlock significant profits: a full gap fill to $39.66 would represent an impressive 14.43% gain.
Even partial gap fills offer attractive targets – a 50% fill to $37.16 would yield a 7.21% return.
This setup exemplifies why we love the Gift Gap strategy: it offers clearly defined targets with considerable profit potential.
And to make things even more juicy, we use options to trade this strategy, which means returns can be amplified even further.
Time Frame:
ALLY hasn’t started its run yet, but that’s the beauty of it – you’re right at the starting line. When the stock decides to move, it could be a sprint, not a marathon. I’d be surprised if its still trading at these current levels four weeks from now.
Profit Targets:
Given the current price of $34.66, consider setting multiple profit targets:
- Initial target at $35.91 (25% gap fill)
- Secondary target at $37.16 (50% gap fill)
- Tertiary target at $38.41 (75% gap fill)
- Final target at $39.66 (full gap fill)
Your Action Plan
- Stay alert for gap-down events, especially during volatile market conditions.
- Use the Gift Gap criteria to identify high-probability setups.
- Implement proper risk management, even with high-probability trades.
- Consider using multiple profit targets to maximize the potential of each trade.
- Keep an eye on broader market conditions, as they can affect the speed and likelihood of gap fills.
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