In this extremely volatile market, it pays to develop a trading strategy that can work in any market environment. And with Q1 Earnings getting ready to heat up in just a week or two, this, in turn, should provide traders with a ton of opportunities to make money through focusing on those companies that not only beat expectations, but guide higher as well.
A perfect example of this strategy is Lululemon (LULU), which reported its earnings last week, beat expectations and guided higher as well. As a result, the stock rose over 13% when its numbers were revealed.
I point to LULU as, after the initial pop to the upside, it pulled back 25 points, providing an opportunity to get involved in a trade for those who did not own the stock when earnings were reported. And I've shown another possible entry level in case the stock pulls back even more, providing an even better reward-to-risk trade.
Another company that reported this past week was Paychex (PAYX), which both beat expectations and guided higher. As a result, the stock moved higher, hitting an all-time high.
What I like about this strategy is it focuses on the "best of the best" -- that is, companies that show the one-two punch of both beating earnings expectations and guiding higher as traders tend to gravitate to winners. It then becomes a matter of letting any initial euphoria wear off while looking for levels to enter on any pullbacks.
In order to put this strategy to work, you need to be able to identify those companies that both beat earnings expectations and guide higher. At EarningsBeats, we've developed our "Strong Earnings ChartList". Our current list, available exclusively to our subscribing members, contains 489 companies (and accompanying charts) that have beaten Wall Street consensus estimates as to both revenues and earnings, are liquid and have solid technical charts. In other words, those companies you want to examine as possible trading candidates. If you would like to get access to all of the companies on the list, just click here to sign up for our FREE, widely read EarningsBeats Digest (EBD) and we will include a link in Monday's EBD free of charge.
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