The post-event drift trade

Stocks that close significantly higher on heavy volume tend to drift further over the following weeks. Bernard and Thomas first documented this in 1989 for earnings; the broader gap-up version has been studied in many follow-ups.

Why it works: under-reaction to information. Big institutional buyers do not finish positioning in one day, and price slowly catches up to new fundamentals.

Why it survives: the trade is uncomfortable. The stock has already moved a lot; the gut says "too late." Most retail money fades the gap. That misallocation is the edge.

How to trade it: enter at next-day close after a 5%+ gap on 1.5x volume, hold 45 days, no stop loss (stops destroy the edge in backtest), 2% position size. See our public backtest at cloudtrades.net.