By: Jeff Cooper
Hit and Run Morning Stock Report: June 1, 2023
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The Best Tool On the Planet To Tame Earnings Volatility
Let’s take a look at how the Square of 9 Time/Price Calculator can help navigate the extreme volatility associated with earnings.
The Square of 9 is the only trading tool that integrates time and price, allowing traders to identify where to sell into strength and buy into weakness.
On Tuesday, AI exploded to 44 after gapping up to new highs.
The 44 high represented a ramp from a low in the 17 region on May 3rd.
On Wednesday, AI had already pulled back 6 points into the bell.
After reporting, it shed another 7 points to 31.
The Square of 9 image below shows the interrelationship between price and time in AI.
From 17 a 360 degree advance ties to 37.
37 is one full ‘square’ or 360 degree price cycle up from 17 (green).
Notice how 17 and 37 “point to” May 3rd for a Time & Price square-out.
As legendary trader and market seer W.D. Gann wrote, “When time and price square-out (balance out) expect a change in trend.”
This certainly was the case as AI ripped from a low near 17 on May 3rd to 44 on May 30th.
Stocks/markets move in 90 degree decrements. The next 90 degree advance from 37 is 43/44 (orange).
When AI snapped 37 after hours, it plunged to 31 (purple) which is 90 degrees lower and represents a 180 degree decline from the 44 high.
Note the prior resistance in the 31 region should now act as support and how the 44 “square” struck on Tuesday coincides with the top of a trend channel.
Combining pattern with time and price allows traders to anticipate climatic moves both up and down.
Just as this technique nailed the 44 high, it will tell us whether this drop to 31 support will perpetuated a rebound to Phil D Gap at 35 or potentially higher over coming days.
Today is June 1st which “points to 35.”
Why potentially higher? Because a true square is a cube and a cube is 540 degrees (90 degrees X 6 angles).
540 degrees up from 17 low is 49.
The second earnings play we’ll look at today is OKTA which plunged from the 91 region on Wednesday to 76 after reporting on Wednesday.
The drop after the bell follows a remarkable May rally from 66.82 to 91.50
OKTA exploded from the 66 handle on May 1st to 91.50 on May 31st.
After earnings Wednesday it plunged to 76.
The Square of 9 shows that 270 degrees up from 66 (green) is 92 (purple).
OKTA respected this 270 geometry with authority on Wednesday.
180 degrees down from 92 is 74 (orange).
90 degrees up from 66 is 74.
The normal expectation would be for OKTA to stage a rebound of some degree from the 74 level if it’s tagged this morning.
If so, 78.50 is straight across and opposite today, June 1st.