We're deep into earnings season, which means patient traders can put themselves into a position to profit handsomely. The process starts by identifying those companies that beat earnings expectations and gap up sharply on strong volume, because these are the types of stocks that traders will be watching to pounce on when things settle down.
A perfect example is QuinStreet, Inc (QNST), a company that beat earnings expectations last week and exploded higher on massive volume. In fact, this was an EarningsBeats trade alert that rose 10% in just two days and 27% at its peak based upon its earnings report. Obviously, traders loved what they heard and piled in on the stock. However, unless you owned the stock into its earnings report, it would be tough to chase; profit taking is guaranteed to kick in at some point, a matter of when, not if. But if you learn how to be extremely patient, there's a strong chance you will get another shot at profiting from the stock.
For example, look at the chart below and you will see that, prior to the explosive move to the upside, the stock had closed between its 20- and 50-day moving averages that were right in sync. So might the stock pull all the way back to this key level of technical support? It just might, and what a gift that would be. But that might be asking for too much. Instead, the stock could easily pullback to Thursday's low of $15.86, which would represent a 9% haircut.
There will be TONS of stocks like QNST that gap up sharply after earnings, so then it becomes a matter of identifying them and being ready to get involved at key price or technical support when they pullback - which they will - and become high reward to risk trading candidates. In fact, I recently began my new FREE newsletter, the EarningsBeats Report, which includes identifying key earnings reports, potential trading candidates and educational Case Studies on actual trades. If you would like to receive this FREE newsletter, just click here and I will add you to the list.
Earnings Season brings with it all kinds of surprises, both positive and negative. Learning how to trade those stocks that beat expectations can be highly profitable.
At your service,
John Hopkins
EarningsBeats
