Yesterday a team member asked me, “What news moves stocks the most?”
That’s a great question…
And it’s perfect timing as we enter another round of corporate earnings season…
If I had to pick my favorite catalyst, it’s positive news from a company’s earnings report.
But isn’t that open to interpretation?
Yes and no … I’ll explain shortly and do you one better.
I’m going to show you what I look for in an earnings winner before placing a trade…
Get ready for all the earnings plays with me every morning in Pre-Market Prep!
It’s The Most Wonderful Time of The Year…
Earnings season is one of my favorite times to trade. It happens four times a year when the majority of publicly-traded companies announce quarterly earnings reports.
Earnings season lasts for roughly four to six weeks following the end of each quarter.
For companies that follow the yearly calendar, each quarter ends in March, June, September, and December.
And they’re some of the best times of the year to trade…
I love them because they’re a consistently repeated catalyst.
So, how can you find stocks announcing earnings?
How to Find Earnings Catalysts
The best way to find stocks with upcoming earnings is to use an earnings calendar…
Yahoo Finance offers one. Or you can use the one on Nasdaq.com…
But my personal favorite is earningswhispers.com. (You can find them on Twitter here. It’s one of the only good reasons to be on Twitter.)
Once you know which companies are releasing earnings and when, now you can look for the earnings winners…
Three Things to Look For to Find Earnings Winners
As day traders, we never try to anticipate a company’s earnings.
A company can have the best earnings in the world. But the stock can tank if it doesn’t meet analyst expectations or lowers its outlook for the next quarter.
The opposite can also be true…
A company’s earnings can be horrible. But the stock can soar if the company beat analysts’ expectations, or announced a new company direction and CEO.
So what makes a stock an earnings winner?
Price action.
We look for stocks having a good reaction to earnings.
So during earnings season, I use my screener to find stocks with:
- Earnings
- Trading volume of more than 50,000 shares in premarket.
- A 5%+ gain for the day.
- A price of $20 or less. (You can use any price range you’re comfortable with.)
That will show me only the stocks having a good reaction to earnings. From there you can read the earnings report.
But you don’t even have to be a great fundamental analyst…
The market will show you what you need to know about the report.
Because it doesn’t matter what you think is good revenue or earnings. It only matters what the market thinks.
As day traders, we want to see stocks with good data that run after earnings. Recognize the trend, join the crowd, and take advantage of the momentum. Don’t play guessing games.
Earnings season starts soon! Join me every morning in Pre-Market Prep as I break down all the action.
See you there tomorrow! Have a great day everyone.
Tim Bohen
Lead Trainer, StocksToTrade