Detect earnings-driven price gaps and classify as pre-earnings risk, volume-confirmed gap up, breakdown risk, or unconfirmed material gap
Answers whether an upcoming or recent earnings report is opening or widening a price gap for your stocks. It reads up to 120 adjusted daily equity candles plus the synced earnings calendar and computes the open gap and the close-to-close move of the first session after the report (before a report, of the latest session), ATR percentage, a 20-day volume spike, and days to the report. It classifies each name (for example pre-earnings gap risk, post-earnings gap up on volume, breakdown risk, or a material gap that did not pass the size-and-volume test) with a 0-100 technical score. It describes gap and volatility conditions around earnings and does not recommend a position size; note it uses adjusted daily data, so intraday reaction is not modeled.
Event-driven risk measurement around scheduled announcements.
A GAP is the difference between one regular session's open and the previous regular session's close. It is often described as a move that happened while the market was closed, but that is loose: equities trade in premarket and after-hours sessions, so trades may well have occurred at prices in between - the gap describes a discontinuity between REGULAR-SESSION prints, not an absence of trading. Earnings are the classic scheduled cause, and the known date is what makes them teachable: anticipation and reaction can be separated.
The measurements are the open gap of the first session after the report (before a report, of the latest session), ATR as a percentage of price (Wilder's average true range - the range measure that includes gaps, which is exactly why it is the right one here), a 20-day volume spike, and days until the report.
Two caveats are essential.
ADJUSTED DAILY DATA. Prices adjusted for splits and dividends are restated backwards, so a historical price in the series is not the price that traded that day. Adjustment aids comparability of returns, but it is not the right basis for measuring a RAW opening gap: across a split or dividend boundary, back-adjustment can shrink or remove the very discontinuity being measured. Measuring a traded gap properly means unadjusted session prices with corporate actions handled separately.
DAILY BARS CANNOT SEE THE REACTION. An earnings move happens in seconds and often reverses within the session. A daily bar compresses the whole path into open, high, low, close and volume, so the SEQUENCE - which is where the risk actually is - is not recoverable.
And association is not cause: a gap in the first session after a report does not by itself establish that the report produced it.
On the finance: an earnings date being known means the market has had time to form expectations, so what moves price is the SURPRISE relative to those expectations rather than the result itself. Implied volatility is typically elevated before a known event and typically falls once the uncertainty resolves - a well-documented pattern, though not an invariant one.
The classification labels and the 0-100 technical score are our own convention; their thresholds are not published here.
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