Monitoring earnings and news | stockbee


Monitoring earnings and news

Over the weekend there was lot of discussion on the Season of opportunity is approaching thread about how to monitor earnings and news catalyst. Muddy detailed his method. If you go through his approach, you will find he uses commonly available sources of news to find his trades.

Here is a simple human algorithm I use to find possible earnings and Episodic Pivots candidates before they make a move:
The system is simple it just needs to be followed with military precision , no ifs and buts.

1 Isolate IBD 100% plus earnings
2 Isolate 100% plus from WSJ (IBD does not have foreign stocks)
3 Track after hours reaction for earnings announced in evening. This is easily available on these pages:
Earnings Watch
Updates Advisory and Surprises
Winners and losers

4 Track morning 100% plus announcements on Marketwatch . First thing in morning I go through this page and look at all after market announcements and early morning announcements. That is how I saw PENX early morning.

5 In the morning I fire up the Interactive Brokers Top % gainers screen with three conditions:price>5, volume >100000 and stock type= stock. This gives you a list of top 40 price gainers ranked by price % change. As candidates start appearing on this list I quickly research them, if I do not know about them. This scan gives EP candidates throughout day. That is how I saw LLNW on Friday.

That is it. After that in the morning and during day you just have to enter trades from the list as they start popping .If you do that, you will enter many Episodic Pivots , before they qualify for EP scan and benefit from the 10% plus move.

The remaining earnings which are not in 100% plus but which precipitate rally, you will get in Episodic Scans. Besides earnings there are couple of other news catalysts like new products or approval in biotechs, retail sales, earnings guidance raise, brokers/exchange monthly transaction figures, which trigger EP's, so I monitor them. That is the quick, dirty, and low cost way to do it.


christmasfern said...

im done with PENX, out at $30

hector said...

Good call, PENX took off fast, just like RIMM after earnings release, its all over the news now, if anyone have a doubt about EP, there you have it, quick return if you "press the trigger" and watch it like a hawk

Tom said...

Nice move with PENX. But what gives us an early indication that after the earnings and gap up, that it will continue to rally? I'd be curious to know what % of these 100% + earnings gainers move like PENX, especially 2 days after the earnings release? Why wouldn't a stock be fully priced the same day earnings are announced (seems like most would gap up then trend lower or go into a narrow range)?

Pradeep Bonde said...

If a stock is neglected before earnings and has no analyst covering it then it reacts the way PENX reacted post earnings. Every earning season this happens on 50 to 60 stocks. That is how new market leadership evolves.

Amit said...

Hi Pradeep,

Congrats on being featured in the microcap speculator mailout this morning.

While the earnings play is an excellent strategy which many of us have learnt to make money from, first read on this blog, maybe its a good idea to emphasise that even with military precision, there is no sure shot way to earn money inthe market. As a guru says, there are no free lunches ;) There are failed breakouts, even in the ones looking good:

need to have an exit strategy, which is as important, if not more to make money in these kind of plays.

Mike Summers said...

In reply to Tom "Why wouldn't a stock be fully priced the same day earnings are announced (seems like most would gap up then trend lower or go into a narrow range)? "
I'm guessing you believe or have heard of the effecient market theory. However there are situations where the market is not effecient.
There's a number of reasons. As pradeep said the stock had been neglected, ignored, and only had one analyst covering it. As a result, it was undervalued and didn't have the exposure for others to allow it to reach the full value. The effecient market theory says that although individuals can never know everything, the collective knowledge of everyone is representative and reflected in market. Perhaps this is true for the market averages, and perhaps it's even true in the long run, but for stocks like this that are hardly covered by any anylyst, and neglected and unnoticed, it's easy for them to get lost admist all the other stocks.

In addition, the prices can't get reflected instantly in the price... This is because it is a smaller cap that's owned by institutions and insiders.
The amount of shares outstanding is limited. Many institutions take days or weeks to build their initial investment as there are not enough shares available for them to trade all at once. It's why Buffett never really can invest in small caps anymore. I think Jim Cramer even briefly indirectly mentioned this in a fairly recent episode of Mad Money. I think he talked about buying stocks that were up big after news and a lot of volume as the mutual fund owners and hedge funds and what not would need another day to establish their position.

This is just one of the few inefficiencies in the market. Pradeep has another post about the other ones somewhere on this blog.

Also, some techicians and chartists would say that it broke out of a stage 1 and into stage 2 (where stocks should be bought). Technitians don't attempt to answer or understand why, they just recognize the patterns and trade them... because to be profitable, it really doesn't matter why, it may matter why a stock might NOT follow the pattern, or do something out of the ordinary and what it means when it doesn't. Of course I think both technical and fundimental indicators, along with an overall picture viewpoint are important becuase if you can understand why, you can figure out OF the profitable patterns, which are more likely to break out significantly, and maximize your profits.

Tom T. said...

Hi Preadeep - I do not understand that part about scanning 100% IBD moves - I thought you were advisinv that earnings surprises on lesser-known stocks were the way to go. However, it looks like you are describing a scan that looks for other possible moves? A related question: how do you find out if there are any analysts covering the stock? Is there a website you go to or do you read the earnings news release to see if it mentions what anaysts were expecting the stock to do, which would be signs of analyst coverage? Thanks, Tom T.

dduck said...

How do you know how many analysts are covering a stock?

Pradeep Bonde said...

How to trade earnings post explains that:
How many analyst covering stock information is available on yahoo finance as well as msn money central.

dduck said...

What do you think about MANA? They have a very low float at 3.7M, no analyst coverage, and they had no major price movement in the past 65 days. They have 15.1% revenue growth which is obviously over 5%.

The only problem I have with them is that they moved from a 1.6M net loss to a net gain of 328K. Is that a significant increase in net income to consider this stock as a possible buy?

thenagars said...

Pradeep, I came across BID. It released its Q1 earnings on May 7th. The EPS surprise % is 316.7
The stock is down 3% since Q1 announcement. What is the reason for this? Would you consider it a good buy now?

Tim said...

thnagars -

I'm not pradeep, but this method is more interested in the reaction to earnings and other events and not the events themselves. The price didn't react positively to the earnings so it should be avoided.

dduck said...

Is the Interactive Brokers Top % gainers screen available only for subscribers?

Tom said...

dduck - you have to be a customer of IB and using their TWS trading platform I believe.

Mike - thanks for the detailed reply.

Pradeep - you say that 50-60 stocks move like this each quarter? Sounds too easy. Does it make sense to follow current winners (stocks already up 100% or more YTD) into the coming earnings season? Stock list here:

Pradeep Bonde said...

MANA- no catalyst.
BID- 7 th may it was rallying in to earning. Not a neglected stock.
The bespoke list is not a complete list.

antonio said...

How do I screen stocks with Interactive Brokers ?

Pradeep Bonde said...

go to "Page"
You will find "Create market scanner"

Chad said...

So you don't enter a earning play that meets your other criteria (that you talk about in other posts) unless/until you see it start to pop?

Pradeep Bonde said...