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Earnings Season Brings New Opportunities

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This is my favorite time of the quarter.  Being a "technifundamentalist", I like finding companies that look solid both technically and fundamentally and concentrate my trading efforts there.  For me, it all begins with volume.  If a company reports earnings and receives a ho-hum response in terms of volume, I'm not interested.  High volume is still a necessity during any "accumulation phase".  Therefore, consider narrowing your trading choices down to stocks that report earnings and produce extremely heavy volume that accompanies a surge higher.  A maribozu candle (one that opens on the low and finishes on the high) is perhaps the best indicator of uncontrollable buying interest, or accumulation.  It doesn't mean I'd chase the stock, but it's one that could easily be kept track of at StockCharts using a ChartList.  Wait for a pull back to price support, gap support or a key moving average and seize the opportunity.
 
Here's a very simple illustration on how to first find stocks that produce heavy volume:

Diamond Scan Screen

Notice that my primary concern on this scan is volume - lots of it.  I don't even consider a stock unless it produces daily volume 3 times its average level over the past 90 days.  I also filter out less liquid stocks by requiring that the 90 day average be at least 200,000 shares.  I run this scan every day during earnings season to identify stocks that are both technical and fundamental winners.  Then comes the patience and discipline, allowing a trade to set up.  On this particular scan, I'm looking at stocks that met my criteria 7 days prior.  That gives me an opportunity to see how they've traded since the big volume day.
 
I've identified one stock that reported earnings recently that fits the bill and I'm including it as my Chart of the Day for Monday, April 8th.  You can CLICK HERE for more details.

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Tom Bowley
About the author: co-founded Invested Central and served as the site's Chief Market Strategist for more than 10 years. His unique trading style combines both his fundamental and technical strategies to systematically manage risk while trading. A regular contributor to StockCharts.com's bi-weekly ChartWatchers newsletter since 2006, Tom's role at StockCharts has expanded significantly since he joined the company as a full-time Senior Technical Analyst in March of 2015. Learn More
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