The Ceasefire Trade: How to Play the Gap-Up Open
A relief rally after an Iran ceasefire sets up a potential follow‑through day. Here's what to know and what is now your 'best friend.'
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Trading Strategy
Stocks around the world are blasting higher on news of a two-week ceasefire agreement with Iran. Oil is trading down by more than 12% after Iran agreed to a complete, immediate, and safe opening of the Strait of Hormuz. Peace talks are expected to take place on Friday in Islamabad, with Vice President Vance leading the U.S. delegation.
Don't Overthink the Deal
Both sides are claiming victory. President Trump's critics are calling this another TACO situation, where he chickened out at the last minute. That misreads what happened. Trump's threats were taken seriously by Iran, by Gulf states, and by his political critics. The more likely reading is that this is a trap for a country that has never lived up to its promises.
Iran continued launching missiles and drones at Israel and the Gulf states within hours of the announcement. There is also language in Iran's agreement about "technical limitations" for Strait access that gives Tehran plenty of room to define compliance on its own terms.
The two-week clock starts now, and Iran's track record suggests the odds of full compliance are not high. If that happens, Trump has a cleaner justification for more aggressive action than he would have had if he had bombed first.
The Islamabad talks on Friday will be the first real test of whether this holds.
A Technical Follow-Through Day
This strong move higher has the makings of the technical follow-through day I have been discussing. If it holds, at least partially, it will be a large percentage move on higher volume and will signal a clear change in trend.
Many investors are out of position and will scramble to add risk and cover shorts. There will be plenty of FOMO at work.
How to Handle the Gap
Chasing the open is typically not a good idea. If you want to buy, wait at least an hour and then look for intraday higher highs for potential entries — a strong close matters. If there is too much intraday fading, it will be a warning sign of limited momentum.
There will be a large unfilled gap on the charts created at the open. Technically, it will act as a gravitational pull, and there is a danger that it will eventually fill. The bulls are looking for gap-and-run action as a new trend develops, but it won't be a smooth ride.
My Best Advice
Focus on individual stock picking rather than index movements. Many stocks have been badly and unfairly beaten up. Those are your best vehicles for outsized gains if a new trend takes hold. They are also easier to accumulate incrementally if volatility stays elevated.
That shopping list we have been building for the last six weeks is now your best friend. Focus on the best names and charts on that list and don't get too hung up on the news flow or the indexes.
Related: As Iran Conflict Weights on Markets, the Korean Defense Sector Is Thriving
At the time of publication, Rev Shark had no positions in any securities mentioned.
