A Clean Example of an EP + Opening Range Breakout
Had a few people ask questions after the recent post about EP setups and Opening Range Breakouts, so here is another example using RCAT.
RCAT gapped up 19% after news the night before that the company had secured a production contract with the U.S. Army.
This is exactly the type of catalyst that creates an EP (Event/Earnings Play).
You would typically spot this during your premarket scan, then read the news and build a plan before the open.
The key criteria were all there:
✔ Gap of 10% or more
✔ Huge volume
✔ Major news catalyst
✔ Momentum moving into the open
Because of the massive volume coming in, this was a perfect candidate for a 1-minute Opening Range Breakout (ORB).
The plan is simple.
Enter on the break of the opening range high and place the stop at the opening range low.
From there, the goal is simply to manage the position as the move unfolds.
Both Kristjan Kullamägi and Mark Minervini talk about selling into strength on large momentum moves.
In this example the trade could be managed like this:
• Sell 1/3 into strength after the first strong push
• Sell another 1/3 on a major reversal bar after the extension
• Let the final 1/3 run and trail a stop using the 10 or 20-day moving average
For beginners, Kullamägi often suggests using the 10-day moving average and waiting for a close below it.
This keeps you in the trend while protecting the majority of the move.
In this example:
• First 1/3 captured roughly 11x the initial risk
• Second 1/3 captured roughly 20x the initial risk
• Final 1/3 exited on the 10-day moving average break
This is the power of high momentum EP setups combined with tight initial risk.
The initial stop is small.
But when the move works, the reward can be many multiples of that risk.
And that is exactly what professional momentum traders are trying to achieve.
If you haven’t read the full breakdown of these setups yet, you can read it here: https://tradingmomentum.substack.com/p/the-3-trading-setups-that-turned
