Pradeep Bonde: The Art of Swing Trading Episodic Pivots

Your favorite trader's mentor, Pradeep Bonde; A masterclass in Swing Trading Episodic Pivots from a Legend in the field in the 2024 TraderLion Conference

Sep 19, 2024

Pradeep Bonde Post Index:

Pradeep Bonde: 2024 TraderLion Conference - Episodic Pivots (Part 1/3)
Pradeep Bonde: 2024 TraderLion Conference - Momentum Burts (Part 2/3)
Pradeep Bonde: 2024 TraderLion Conference - Setup Examples (Part 3/3)

Pradeep Bonde (PB) also known as “Stockbee” is a veteran swing trader and the founder of the Stockbee community. He has been the mentor to many famous traders including the well known Kristjan Kullamägi.

PB trades 2 main setups;

Catalyst-Based Setups (or Episodic Pivots)
Momentum Bursts

In this post, we will be going over PBs presentration on the 2024 TraderLion Conference, where he discuss his famous Episodic Pivots setups, with variations.

Catalyst-Based Setups

Pradeep focuses on what he calls “Episodic Pivots” with differnt variations of this setup that include names such as Stocks in Play, Delayed Reaction EP, 9 Million EP, Sugar babies

The goal of this type of setup is to catch large moves in stocks that will increase his account in a big way. The original idea of “Catalyst-based” setups come from the Episodic Pivot (EP) idea. But in recent years, EPs have been less frequent in the market.

Episodic Pivot:

A stock that creates a significant gap in price for a catalyst-worthy event. The market completely re-evaluates its view of the stock. The catalyst ultimately changes the market view of the stock and because of that particular “episode” the price then gaps up or down significantly.
This was PBs original idea 20 years ago but over time there have been fewer setups that align with his criteria so he has created variations of his classic EP setup.
In the beginning, PB was looking for “real catalysts”, real earnings, real sales and you can see the company having tangible results, resulting in the stock gapping up! However, PB realized through experience and years of trading that there are stocks that gap up with no real catalysts, just stories, hot air; but these stocks can make bigger moves than stocks that have real tangible numbers.
The difference however is that he is able to have way more conviction on “real” catalyst gap-up setups because of the tangible and real numbers backing up the stock.

“Real” Episodic Pivots:

There are 2 types of “Real” Episodic Pivots he discusses:

(1) Growth Type Companies

PB notes that he pays a lot more attention to sales growth rather than earnings (EPS) because earnings, in today’s market conditions, don’t matter. What matters for a stock to make significant moves (w.r.t EPs) is sales growth.

Any sales growth above 39% on consecutive earnings releases will have a high probability of making a move higher because that type growth is rewarded in the market (from PBs past analysis of big historic movers)

Example of Growth EP: CRDO 0.00%↑

(2) Turnaround Type Companies

The stock in the past has been been neglected and done poorly but come out with sales and earnings growth that surprises the market. Turnaround EPs often make bigger and longer moves than Growth EPs because the stock gets beaten down so heavily with so much neglect that when it manages to turn around, the stock explodes.

Example of Turnaround EP: ANF 0.00%↑

“Real” Catalyst Criteria

PB breaks down the criteria he looks for in an EP using:

MAGNA53 + Cap10 * 10IPO

MA = Massive Acceleration in Profit Growth; growth of double or triple-digit numbers. Massive beats on analyst expectations would also be under this category (ex. analyst expect ¢10 while the company posts ¢50).

G = Gap Up; If the news is a surprise to the market then the stock should gap.

N = Neglected; He wants stocks that are neglected. Has the stock been neglected for 2 months, 6 months, 1 - 3 years, and the more neglect the bigger the possible swing? Neglect is not just neglected in price action but also in the number of mutual funds holding the stock. No news flow, no analyst coverage. You see for months the stock has had no significant news.

A = Acceleration in Sales Growth; Remember, if the company delivers massive profits, they could do that by just reducing the number of employees they have (layoffs) which is not really an effective way of growth as it is essentially a one-time cost being cut. PB wants to see massive acceleration in sales as that number can’t be adjusted, in most cases because it is how much revenue on the top the company brings in.

5 = Short Interest of 5 Days or More.

3 = Have 3 or More Analysts Raising Their Price Targets; If there is new news, analysts will then increase their price targets. This is exactly what happened with SMCI in January 2024 when they came out with good guidance and 10-12 analysts raised their price targets.

Cap10 = Market Cap Below $10M; These types of stock will make greater moves. Usually in the range of $10-100M market cap is what PB looks for.

10IPO = Had their IPO 10 years ago or less; Most of the big moves in a stock will occur in the first 10 years of its life. You will have exceptions of course (ie. NVDA) but most of the time, it is the case.

MAGNA = Necessary / Required!
53 = Optional but adds more conviction.
Cap10*10 = Optional, for more explosive moves.

Someone looking for these types of stocks will be doing work in either premarket or postmarket.

NTRT , MTRT = Night Time is Right Time, Morning Time is Right Time

PB will using tools to scan for stocks that have these criteria. For example:

Briefing.com for earning metrics and pre/post market news
The Fly for additional news
PBs own software he created

“Story” Episodic Pivots:

You have to understand what kind of “stories” (or themes) are working in the market.

Example of Story Catalyst: ACHR 0.00%↑

In January 2024, the AI theme was a prevalent, hot theme that was boosting certain stocks up.

EP Entry and Risk Management

If it meets his criteria, for either a Story or Real Catalyst he will enter at the Open. Normally with a 2.5% stop loss. If he gets stopped but has conviction in the catalyst he will re-enter. However, if the price hesitates after he gets in, at times, he will close the trade because normally they have strong buying or selling pressure near the open. Now if he expected the stock to make a triple-digit move, he would be willing to take a 10% stop because it will make multiples of his risk.

Or he will wait a few minutes to see how the market reacts to the news before entry as there are shakeouts. At times, he may even wait for a Delayed Reaction setup (entering a day later) because he doesn’t believe the first day move will be strong.

Depending on the strength of the catalyst, there will be situations where it is a Must-Buy setup. For example, when he saw the SMCI catalyst, in January, he knew he had to buy it, compared to something like SRPT where he decided to play a Delayed Reaction setup. w

For exiting, he will determine an approximate profit target based on past experience and catalyst strength. So if he is anticipated a 60-70% move, he wont be in a hurry to exit the stock if it moves 30% because his expectation is that there is still room for the stock to move further.

In a good market, PB expects:

70% win rates
Average of 10-12 Classic EPs a year

In a choppy or bad market environment, PB expects:

Would be lucky to get 3-4 Classic EPs a year

Catalyst Based Variations:

Stocks in Play Sub-setup:

Day trade setup. As some stocks will only be active for one day and liquidity will dry out after. Therefore only an intraday play can be made.

Delayed Reaction Sub-setup:

Looking for stocks that have a catalyst (day 1) but enter on the next day or when the setup occurs.
This type of variation works very well on the short side because when there is a negative catalyst, the stock gaps down then tends to reverse throughout the day. After 3 or 4 days there is the assumption that news is priced in, however, the stock on these setups drifts down further.
Similarly this occurs on the long side.

Example of Delayed Reaction Real EP: HIMS 0.00%↑

Example of Delayed Reaction Story EP: BA 0.00%↑

9 Million EP Sub-setup:

His main EP setup he uses. Most of his profits now come from 9M EPs or Sugar Babies setups.
Looks for stocks that were neglected and had low volume but surged with volume of 9 million or more.
Usually, this is a story stock that has a narrative

PB expects:

100-300 trades in a year

Example of 9 Million EP: GME 0.00%↑

Sugar Babies Sub-setup:

A variation of the “9Million EP” setup where there will be a continuous number of these 9M EP setups that continue and make these big swing moves (40-50%) in just a few days.

Example of Sugar Baby EP: MARA 0.00%↑