Episodic Pivots
Episodic Pivots (EP) is a catalyst-driven momentum strategy designed to identify stocks experiencing significant price movement due to fundamental news events. The strategy focuses on gap-up stocks with volume confirmation, targeting multi-day momentum moves.
Overview
Episodic Pivots occur when a stock gaps significantly higher on news—earnings surprises, FDA approvals, contract wins, analyst upgrades—with accompanying volume surge. These events can initiate sustained momentum moves as institutions reposition around the new information.
What This Feature Provides
- Gap Detection — Identifies stocks opening significantly higher than prior close
- Volume Confirmation — Validates gaps with relative volume surge
- Catalyst Identification — Analyzes news to determine gap driver
- Technical Scoring — Evaluates setup quality across multiple factors
- Trade Tracking — Monitors active EP positions with signal status
- Setup Classification — Categorizes opportunities by expected behavior
Why It Matters
Catalyst-driven gaps represent information asymmetry being resolved:
- New information forces price discovery
- Institutional repositioning creates momentum
- Volume confirms conviction behind the move
- Follow-through often occurs over multiple days
Key Concepts
What is an Episodic Pivot?
An Episodic Pivot is a stock that:
- Gaps significantly (typically 3%+ or higher)
- Shows volume surge (multiple of average volume)
- Has an identifiable catalyst (fundamental news event)
- Demonstrates institutional participation (volume pattern)
The term "pivot" refers to the price pivoting from one equilibrium to another as the market digests new information.
Catalyst Types
Different catalysts have distinct characteristics:
| Catalyst | Typical Gap | Duration | Risk Level |
|---|---|---|---|
| Earnings Surprise | 5-15% | 2-4 weeks | Moderate |
| FDA Approval | 20-100%+ | 1-7 days | High |
| Trial Results | 30-200%+ | 1-5 days | Very High |
| M&A Announcement | 10-30% | Days to weeks | Moderate |
| Analyst Upgrade | 3-10% | 1-2 weeks | Lower |
| Contract Win | 5-20% | 1-2 weeks | Moderate |
Market Cap Considerations
Research shows market capitalization significantly impacts EP behavior:
| Market Cap | Expected Move | Typical Duration | Strategy |
|---|---|---|---|
| Under $100M | Very large (100%+) | 1-5 days | Aggressive, wide stops |
| $100M-$1B | Large (50-100%) | 3-14 days | Momentum focus |
| $1B-$10B | Moderate (20-50%) | 1-3 weeks | Swing trade |
| Over $10B | Smaller (10-30%) | 2-4 weeks | Position trade |
Smaller market cap stocks tend to have more explosive moves but higher volatility and shorter durations.
Scoring System
TradeAnon evaluates EP candidates across multiple factors:
Gap Magnitude (0-3 points)
- 3%+ gap: 1 point
- 7%+ gap: 2 points
- 15%+ gap: 3 points
Volume Confirmation (0-3 points)
- 1.7x 20-day average: 1 point
- 2.0x 20-day average: 2 points
- 3.1x 20-day average: 3 points
The 3.1x threshold has historically shown 78% success rate in follow-through.
Market Cap Bonus (0-2 points)
- Under $300M: 2 points
- $300M-$1B: 1 point
- Over $1B: 0 points
Resistance Breaks (0-2 points)
- Broke 20-day high: 1 point
- Broke 252-day (52-week) high: 2 points
Relative Strength (0-2 points)
- RS above 1.2 vs S&P 500: 1 point
- RS above 1.5 vs S&P 500: 2 points
Total Score Range: 0-12 points
Higher scores indicate higher quality setups with better historical follow-through.
Signal Status
After entry, TradeAnon tracks EP positions with a three-tier signal system:
Green Signal (Healthy)
- Price above key moving averages
- Trend intact
- No exit signals triggered
Yellow Signal (Warning)
- Price approaching support levels
- Momentum weakening
- Consider tightening stops
Red Signal (Exit)
- Exit criteria met
- Close below key moving average
- Consider closing position
Setup Classification
Based on market cap and gap size, setups are classified:
Hyper Momentum
- Small market cap + large gap
- Target: 100-300%
- Stop: 15% trailing
- Expected duration: 1-5 days
- Risk: Very High
Swing Trade
- Mid-cap + moderate gap
- Target: 50-100%
- Stop: 8% fixed
- Expected duration: 3-14 days
- Risk: High
Position Trade
- Large cap or small gap
- Target: 20-50%
- Stop: 8% fixed
- Expected duration: 14-30 days
- Risk: Moderate
How to Use This Feature
Daily Screening
- Check the scanner after market open for new gap-ups
- Review scores to prioritize highest quality setups
- Verify catalyst through news analysis
- Assess setup type based on market cap and gap size
Entry Considerations
- Wait for opening range — Don't chase the gap blindly
- Look for consolidation — Base formation after gap
- Volume pattern — Continued interest confirms
- Price action — Higher lows and support holds
Position Management
- Initial stop based on setup type (8-15%)
- Monitor signal status daily
- Yellow signals — Tighten stops
- Red signals — Execute exit plan
Practical Examples
Example 1: Earnings Gap
A mid-cap technology company reports earnings:
- Gaps up 12% on 4x average volume
- Beats revenue and raises guidance
- Score: 8/12 (high quality)
- Setup type: Swing trade
Management: 8% stop below opening range low, target 50% gain, expect 1-2 week hold.
Example 2: FDA Approval
A small biotech receives FDA approval:
- Gaps up 85% on 150x average volume
- Market cap $200M
- Score: 11/12 (excellent)
- Setup type: Hyper momentum
Management: 15% trailing stop, expect volatile 1-5 day move, size smaller due to high risk.
Example 3: Analyst Upgrade
A large-cap stock receives analyst upgrade:
- Gaps up 4% on 1.5x average volume
- Market cap $50B
- Score: 4/12 (lower quality)
- Setup type: Position trade
Management: May not be tradeable as EP—volume confirmation weak. Better suited for longer-term position.
Volume Metrics
Volume Expansion (RVOL)
Relative volume compared to 20-day average:
RVOL = Today's Volume / 20-Day Average Volume
Interpretation:
- 1.5x: Elevated interest
- 3x: Strong institutional activity
- 10x: Major event
- 50x+: Exceptional (typically small caps)
Volume-to-Gap Ratio
Research-derived conviction metric:
Interpretation:
- Above 3.1x: Strong conviction (78% historical success)
- 1.7x-3.1x: Moderate conviction
- Below 1.7x: Weak conviction (12% historical success)
Float Rotation
Volume relative to tradeable shares:
Float Rotation = Volume / Float Shares
Above 30% float rotation indicates high turnover and potential squeeze dynamics.
Limitations
- Not all gaps follow through — Many gaps fade or consolidate
- Catalysts can be misleading — Initial news may be incomplete
- Small caps are volatile — High potential returns come with high risk
- Timing is difficult — Entry and exit timing significantly impacts returns
- Past performance varies — Strategy performance varies by market regime
Related Strategies
EP works well in conjunction with:
- Webster Power Trend — Trend confirmation
- Dark Pool Analytics — Institutional flow confirmation
- Real-Time Scanner — Gap detection
Related Concepts
Subscription Access
| Tier | Access Level |
|---|---|
| Free | — |
| Pro | Full access |
| Enterprise | Full access |