Playbook Review: 10-19-2015 WTW

Title: Knowing when to get long the massive gap-ups on dips on the open.

Strategy Description: About 2 months ago gaps of 100%+ were fading off pretty easily. They would have their first down move then the bounce would fail roughly around vwap and then at some point around 9:50-10:15 you would know they were absolutely toast and have confidence in a fade off for the rest of the day. But the market changed somewhat and they started having a second wave higher after the open, after having an initial move down.
Now I would just add that there hasn't been any "true trashy" companies gapping up 100% since then, so it is somewhat expected that they wouldn't completely fade off like the true trashy companies would. For example a $1b biotech company with 100% gap is a lot more likely to find some support and stage a decent bounce at some point compared to a shitty $100m company.
For this reason alone it is worth considering that WTW may have a secondary wave up.

Now consider the news on WTW, the fundamentals, and the price action. It has a >20% short interest. It has >90% insitututional ownership (thus making the float low). It has a billionaire investor (common news for the monster runners). The premarket price action has not been particularly weak (a lot of the all day fader ones have already crapped out by the time the market opens). All of this doesn't exactly paint a picture for  something to throw size at near the lows on the open!!! It actually suggests that it might be worth trying to buy a flush on the open for at least a bounce to vwap. Even the crappy ones will have some sort of bounce! Then see how it behaves around vwap, and wait until more time has passed to make a decision if it's going to fade or not. Also the volume is indicative of strength.

Remember that a lot of the time it is natural to have some sort of flush as some people take profit on the gap up. This profit taking isn't indicative of the final trend.

Looking at the intraday chart you can see it held premarket support pretty cleanly before effectively rocketing back up to the highs after a slight pause near vwap.