Hi everybody — JD here with your Rational Trader market analysis.
In today’s video, I tackle something that doesn’t come up often… but when it does, it can throw a wrench in your whole plan:
What should you do when an open trade runs straight into a news event?
In this case, I’m talking about earnings season — but the same logic can apply to any major announcement.
BJ’s Snapback Rally
This issue came up for me today with a trade I had in BJ’s Wholesale (BJ). It was a short-term setup — we entered last Thursday (May 15) on a green diamond trigger and caught a solid snapback rally, just like the ones we talk about in my Two Sigma framework.
From the moment the signal fired, the stock rallied around 7–8% — and the options shot up between 85% and over 100%! Not bad for a three-day trade.
But here’s where it got interesting: as of an hour before today’s close, BJ’s was flashing a red bar on the Roadmap — and they’re set to report earnings this Thursday.
That’s when I made the call: close the trade.
The Real Risk of “Letting It Ride”
Now, sure — earnings could be great. If I’d stayed in, that 100% win could’ve turned into 150%.
But if they disappoint — and many retailers have had mixed results this quarter — we could easily have seen the stock give back $10–15… wiping out the whole trade.
In my book, that’s risk I don’t need to take.
My General Rule for Trades Facing Big News
If I’ve already got a decent gain, and the trade is about to run into a major news event — I close it.
No, it’s not always the most exciting decision. And no, it doesn’t always maximize gains.
But it’s consistent. It protects profits. And it keeps me in control.
If the trade had gone nowhere or barely moved? That’s a different story. But when you’re up big… and a coin flip like earnings is coming?
I’d rather take the win.
See you tomorrow.
JD
The Rational Trader
P.S. Geof Smith tells us the recent U.S. debt downgrade could send THIS soaring.
