If you’re struggling to find great plays right now, you’re not alone.
August is one of the slowest months in the market. People take last-minute vacations, and in some states, kids are going back to school.
But if you know where to look — you can always find opportunities.
So today I’m sharing two raging stocks with you that might offer a potential trade…
They’re running on a catalyst that can produce some pretty huge multi-day runs.
But beware.
Not all stocks with this news will skyrocket like these two…
I’ll show you one that’s tanking and what to look for so you can avoid getting in the wrong stock.
Let’s go!
How to Spot Winning Plays
Things are slow in small caps right now. It’s just part of the ebb and flow of the markets and trading…
But the one catalyst that’s still working to spike stocks right now is earnings.
When I look for earnings winners, I don’t get overly fixated on things like revenues and earnings per share.
What truly matters to me is how the market responds to the earnings report. I care about price action only.
A company might surpass the revenue predictions of analysts, but if the stock takes a tumble, it’s likely because the company’s future prospects don’t look so rosy.
Conversely, a company might fall short of revenue expectations, yet its stock could still climb because they’re making smart moves to reshape the business.
There’s a multitude of factors at play that influence how a stock reacts to earnings beyond just the cold hard numbers.
That’s why, in my book, price action is the ultimate tell-all.
And this is what you want to see…
CleanSpark, Inc. (NASDAQ: CLSK) announced earnings after hours on Wednesday and yesterday the stock spiked right at the open.
That’s a positive reaction to earnings.
CLSK chart: 1-day, 5-minute candle — courtesy of StocksToTrade.com
But I usually hate Bitcoin stocks on day one of their run. I like them to prove themselves before I plan a trade.
So I’d be looking for some type of continuation move in CLSK, like a red-to-green move or a break above yesterday’s high.
Earnings can often create multi-day runners if the stock can hold its gains.
Applied Optoelectronics, Inc. (NASDAQ: AAOI) is a great example…
The company announced earnings after hours last Thursday. The company’s revenues were down from the previous quarter but the stock still went up … It ran on Friday and then held its gains all week.
Yesterday it had a day three surge-type move as it broke out of consolidation and continued higher.
AAOI chart: 7-day, 5-minute candle — courtesy of StocksToTrade.com
Now that AAOI had a breakout, I’d be looking for similar moves to CLSK — either a red-to-green move to show it’s still strong, or a break above yesterday’s high.
These two stocks show you that while small caps are slow there are still other opportunities in the market.
But not all stocks with earnings are winners.
Upstart Holdings, Inc. (NASDAQ: UPST) announced earnings after hours on Tuesday and the stock had a huge gap down and continued lower since then.
UPST chart: 6-month, daily candle — courtesy of StocksToTrade.com
Earnings are a fundamental change to a company. Which is why they can create multi-day upside moves or downside moves.
But instead of trying to dissect earnings reports and fundamentals, I watch price action.
The market will show you whether a stock is an earnings winner or loser. You’re looking to ride the momentum, not become an expert stock analyst.
So if you want to stay on top of the hottest market trends and themes — get my Market Update videos three times per week here.
Have a great day everyone. See you back here tomorrow.
Tim Bohen
Lead Trainer, StocksToTrade