Trading News
Jul. 17, 20235 min read

How to Find Winning Trades This Earnings Season

Tim BohenAvatar
Written by Tim Bohen

It’s earnings season, baby! And with that can come some incredible trade opportunities… 

However, it’s essential to understand the nuances and avoid common misconceptions.

You could learn all you can about reading and dissecting earnings reports… 

But when a company announces what you think are ‘good’ earnings, the stock can tank. 

And you’re left scratching your head wondering and screaming that the market is irrational. 

There’s a better way to trade stocks with earnings… 

And it can cut out the frustration of trying to interpret earnings reports and turning yourself into a stock analyst. 

So before you jump into a stock that has ‘good’ earnings — read my guide below to discover the key factors that can lead to the best trade opportunities.

P.S. I’m going back to my roots … I began my trading journey as a student of Tim Sykes. Now I’m teaching alongside him. See how you can access some of the best trading educational resources available — book a strategy session with our team today!  

Understanding Earnings Winners

When we refer to “earnings winners” in day trading and swing trading, it doesn’t necessarily mean the company’s financials are good. 

Stocks can drop rapidly even if the company announces increased profits year over year. And vice versa — if a company’s revenue drops, the stock can still go up.

The reason? 

Market expectations. 

Understanding market expectations and how they can affect stock prices is crucial when selecting stocks to trade.

If the market expected the company to perform worse, a smaller loss could be seen as a bullish indicator.

Another reason stocks can move contrary to what their earnings report shows is because of the company’s earnings call… 

After an earnings report is released, a company will usually have a conference call to go over the numbers. This is where management can give reasons for the numbers. If the numbers were below market expectations, management might be able to put a positive spin on it by explaining cost-cutting measures and the stock can go up. 

Conference calls are also an opportunity for management to present forward guidance for the company into the next year or quarter.

Management can hint at what they’re working on in the future, or drop buzzwords like ‘artificial intelligence’ or whatever trend is hot to get traders and investors excited. 

That’s why you can see a stock drop after earnings, but during the conference call, it can start ramping up and continue higher.

So if trading stocks with earnings are unpredictable (trying to predict earnings is a guessing game), how can you find trading opportunities? 

Here’s how…

Finding Earnings Winners

We can run a simple stock scan to find stocks with earnings that are earnings winners. 

I define an “earnings winner” as a stock that reacts positively after earnings. For me, it doesn’t have anything to do with their reported numbers…

To find earnings winners, I like to look for stocks that have more than 50,000 shares traded in pre-market and are up more than 5% on the day with an earnings catalyst.

Price and Volume

Once you’ve identified potential earnings winners, don’t get too caught up in analyzing the earnings statement itself.

Remember, price action is what matters most. Focus on stocks that are moving significantly, accompanied by high trading volume

The market is telling you that these stocks are the real earnings winners.

And as my mentor Tim Sykes says, earnings winners can run higher than you think…

That’s because earnings catalysts aren’t like any other news or a pumpy press release… 

Earnings are the foundation of companies. And a good earnings report or reaction to earnings can be a fundamental change in the company and the stock. 

That’s why stocks that are ‘earnings winners’ can often be good swing trade candidates.

And swing trading earnings winners can be a profitable strategy if approached correctly. 

Learn more about swing trading in my free Swing Trading 101 video series here

By understanding the dynamics of market expectations and focusing on price and volume, you can increase your chances of finding the best earnings winners. 

And swing trading is an excellent strategy for part-time traders. It can help you get familiar with the market while trading stocks that you don’t have to micromanage every single day. 

Stick to the principles I laid out for you, and you’ll be on your way to identifying earnings winners you can day trade or swing trade. 

I’ve got big news coming soon that can help you revolutionize your swing trades — so stay tuned for that announcement! 

In the meantime, join me in StocksToTrade Advisory to stay on top of which stocks I’m watching, and what’s hot in the market… 

I’ll give you my weekly watchlist, and monthly reports on hot sectors. Plus, I’ll send you three videos every week to help you stay on top of what’s happening in the trading world and the markets. 

Have a great day everyone. See you back here tomorrow. 

Tim Bohen

Lead Trainer, StocksToTrade