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Earnings breakouts : GMCR OMX FSLR

Posted on 4/30/2009



So how did the list of stocks to watch work out so far. 
Here is how we handled it on Members Site:
Trade alert (4/30/2009 9:33:00 AM EST)
        

 OMX

6.50



1 Comments.. 
Posted by: easyguru
Trade Alert (4/30/2009 9:31:00 AM EST)
        

 GMCR

64.50


6 Comments.. 
Posted by: easyguru
Trade Alert (4/30/2009 9:31:00 AM EST)
        

 FSLR

177

Trade Alert (4/29/2009 3:08:00 PM EST)
        

 HGG

16.30

pullback buy

-------------------------------------------------------------

And after that we booked partial profit in some of the above positions  and sitting on good profit in them . In this market there are so many explosive moves of 10% plus on earnings. If you have a well thought out methodology you should be finding this market easy to trade. 


AAN: Earnings breakout

Posted on 4/29/2009
AAN: Aarons Inc
Big earnings surprise leads to big moves. Moves like these are dime a dozen in this earnings season. 

Swing Trading Books

Posted on 4/27/2009
I am often asked for  books recommendation. As most of the traders are looking for swing trading related books, this is a list of books which can help you learn swing trading strategies and tactics.
Swing trading is a style of trading practiced by short term and intermedioate term traders to capture part of a trend. 
These books have many ideas the key is converting those ideas in to workable strategies. For that you should be able to convert these strategies in to scans in Telechart or any other software. 
Fortunately most of these strategies have been converted to scans already and if you search the Telechart yahoo group  you will find scan for most of these.
Most swing strategies have well defined methodology , but there is also an element of discretion. So there is some art involved in trading these kind of methods.
 
Mark Boucher

Dave Landry
 
 
 
 
Tony Oz
 
 
 
Linda Raschke and Laurence Connors
 
 
Larry Connors
 
 
 
Larry Williams
 
Stephen Bigalow
 
 
John Markman
 
 
Thomas Carr
 
 

Market timing models

Posted on 4/25/2009

One of the reason many people missed out on the market rally so far or got in late is because of lack of market timing model. Many people were very bearish and when the market turned they never believed in the rally. If you use a market timing model you can get in to such explosive moves.

Market Monitor is my market timing model. It uses market breadth for market timing. Market Timing models try to identify periods when it is favorable and unfavorable to invest in the market. The objective is to be aggressive during favorable periods and to be defensive and less invested during unfavorable period. It signaled a buy on 16th March, 5 days after the turn started. That was the signal to be aggressive and that helped catch many explosive moves in last month and half.

Different people use different approach to build market timing models. I have studied various timing systems over the years and they can be broadly classified as:
  1. Monetary indicators: based on interest rates, bond yield, money supply , consumer debt, business debt, savings etc
  2. Economic indicators: gdp growth rate, industrial production, inventory levels, retail sales, durables sales, new home building and so on.
  3. Valuation Indicator: PE ratios, PS ratio , etc.
  4. Sentiment Indicators: investor surveys, fund managers survey, cover pages, VIX, blogger survey
  5. Cyclical Indicator: President cycles, 4 year cycles, best month, best week, best day, X day % change and so on
  6. Technical Indicators: MA cross, chart patterns,
  7. Breadth Indicators: number of stocks up or down %. Worden has wide range of breadth indicators under All Worden Indicators.

There are many Market Timing models in public domain. Some of the useful books to study market timing are:
Being Right or Making Money by Ned Davis can provide you a template for developing a Market Timing system.
Similarly Martin Zweig in his book Martin Zweig Winning on Wall Street has extensive discussion on Market Timing.
Norman Fosback book Stock Market Logic is another good resource for Market Timing ideas.
The Complete Guide to Market Breadth Indicators by Gregory Morris.This book is very detailed book on market breadth.

RT: Earnings trade Example

This trade was triggered on 4/8/09 after Ruby Tuesday beat earnings expectations by wide margin.
Trade Alert (4/8/2009 9:37:00 AM EST)
        

 Rt
5
EP earnings
1%

17 Comments..
Posted by: easyguru

Along the way we took partial profit and closed the trade yesterday after it achieved my profit target. 
RT closed for 53% profit (4/23/2009 9:54:00 AM EST)
        

 7.65

12 Comments..
Posted by: easyguru

As I have said before, in this earnings season the expectations were so low that any company which beats expectation has had immediate 15 to 20% pop. 
Most earnings season produce 5 to 20 such trades. Most traders have been told to be wary of earnings season and as a result do not look at the profit potential of trading earnings breakouts. While there is a downside risk in earnings season on stock, you are holding, the profit potential of finding stock which breakout on earnings is greater.
Stocks which breakout on earnings do not just make quick rallies, but in many cases they go on to makle big moves after a pyllback/ consolidation phase. PEAD or Post Earnings Announcement Drift is a very well documenmted anomaly in stock market. 
The PEAD is the tendency of stocks that beat earnings expectations to continue to drift upwards in near future after the announcement. Similarly stocks that miss earnings  continue to drift downwards. And the abnormal returns associated with the drift are substantial. The market does not immediately fully incorporate the information contained in the earnings announcement in to the stock price. 



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TIN: earnings breakout

TIN beat earnings estimate by 25 cents and went up 24% yesterday. In many stocks the sentiments and expectations were so low that if a stock beats by 5 cents , it is likely to go up 10 to 20% in a day. 
Currently playing the earnings breakout game is like shooting fish in a barrel. 

SIGA: Trade of the day

Posted on 4/22/2009


SIGA is a stock in the top 5% by relative strength currently. It had a very orderly pullback for last 5 days. So it was highlighted early morning as a stock to watch for possible entry.

Pullback Watch (4/22/2009 8:30:00 AM EST)

SIGA and CSTR


0 Comments..
Posted by: easyguru
----------------------------------------------------------
The trade triggered once it had a high volume breakout around 11:30
Trade Alert (4/22/2009 11:31:00 AM EST)

SIGA

6.20

MDT

1%


2 Comments..
Posted by: easyguru
____________________________________
It went on to make 11.58% move by the end of the day. That was just one of the trade for today. in this market 10 to 20% moves are everywhere and as long as this party continues, the methods like IBD100/200, Double trouble and Modified Double Trouble and Episodic Pivots continue to find such trades.
There were 10 to 15 earnings breakouts today which went on to make 10% moves.

Earnings breakouts a galore

In this earnings season there have been ton of earnings breakouts. After a bear market of over a year and record price drop, investors were too pessimistic about earnings. Under such conditions even a slightly better earnings than expectation can lead to big rally. 
Stocks with earnings surprise are making 15 to 30% moves in a day or two post earnings release. If you have a well thought out methodology to exploit such opportunities, you should be cleaning up in this market. In fact if you are not making money in last one month you should seriously have a relook at your methodology. 

Stocks with high volume breakout yesterday:
APWR
BBEP
BJS
CAEI
CERS
COH
CSKI
DDRX
ELX
FAS
FEED
FNET
FRZ
FTY
GMXR
IAT
KIRK
MAN
MLNX
PKG
QLGC
RFL
ROG
TCK
THC
USG
WU

How the FEED trade worked today

Posted on 4/21/2009
So how did the FEED trade workout today. This was a stock on watch for possible entry today and the entry was at 3.69 and we exited part of the position at approximately 15% profit and let rest of it run.
The entry was triggered at 9.40
Trade Alert (4/21/2009 9:40:00 AM EST)
        

going long

 feed

3.69

.50% risk

stop=2.98

50% of the position was exited at the price of 4.22 for 14.36% profit.

FEED 50% closed for approx 15% profit (4/21/2009 2:41:00 PM EST)
        

 4.22

This was a second trade on FEED post earnings. In the first trade we made 29% profit by holding it overnight. 

This market has offered so many such explosive trades. Today the market rebounded from yesterday's selloff and there were several 10% plus high volume moves on stocks. This is as of now one of the best trading market we have seen in last one year. Stocks are making 15 to 20% moves in a day or two. The party might end any day , but till then this is swing traders market.