Look for big earnings surprises

Earnings season is best time to find big explosive moves. Big earnings surprise start big moves.

Big earnings surprise leads to start of big moves lasting one to 2 quarters.

Everyday hundreds of stocks release news before and after hours. These news releases can lead to stock making big move for just a day or weeks or months. If you develop a skill to understand which stock to focus on from those earnings breakout, you can figure out which is likely to go up for few months or quarters. What you have to look for is extreme surprise or growth.
When the earnings news is released either it is already discounted by the market or the market is surprised by it. If it is a big surprise then the stock discounts that news over next few months. A earnings surprise also tells you a lot about underlying trends in the business. If the underlying force contributing to earnings are sustainable then longer duration rally happens and stock continues to surprise for few quarters.
Earnings surprises on heavily shorted stocks can often lead to big short squeeze and offers very good opportunity.
Announcement related to earnings in either as guidance or actual earnings have potential for starting or ending multi month moves.This phenomenon is called PEAD or Post Earnings Announcement drift. It is considered a market anomaly.
If you want to make big money focus on big earnings surprises.

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2 comments:

Unknown said...: As of 2022, do you still find PEAD to be as effective as in earlier years? There seems to be a lot of research saying it is not that effective anymore.; Jul 30, 2022, 4:29:00 AM
Unknown said...: As of 2022, do you still find PEAD to be as effective as in earlier years? There seems to be a lot of research saying it is not that effective anymore.; Jul 30, 2022, 4:30:00 AM

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