Synaptics Inc (SYNA) reported earnings on October 24th and gapped down under a daily pivot to $64.25. This type of gap down under a pivot puts a lot of pressure on the long positions because it breaks a support level, which then triggers their stops.
How do you trade this on an intraday timeframe? Looking at the chart of SYNA below, you can see I set my chart to a five-minute intervals to avoid a lot of noise and choppiness that smaller timeframes can create.
The first three five-minute bars of SYNA are pushing upward. Now, I look for the stall. I need a red narrow-range candle to form to give a solid entry with good tight risk to reward. The chart displays three five-minute, narrow-range bars in a row. This suggests a potential reversal is in the cards and to get your short under their lows ready.
I set a short entry at $65.70 and place my stop just over the highs of the day at $66.57 which gives me a .87 risk amount. I share-size according to my risk standards I have preset. The trade triggers short at the entry price in my favor.
My main objective from the entry point of a target is at least the low of the day, which is $63.00. Once I have reached my target, I take off half my position there and begin to trail back the other half bar by bar off the five-minute chart.
This ends up trailing me out at $62.74, giving me a gain on both lots of $2.83 while only risking .87. The reward is over three times the risk making it a solid winner. Pivot Break Gaps are one of my favorite gap trades and one of my favorite trades to teach other traders.
