More Strategies for Earnings Plays/Position plays..In light of the many e-mail I've received in the last few days.. I'll attempt once again to expound on some of the strategies for earnings plays/Position plays.
The best strategy is integrating fundamental analysis/technical analysis in daytrading/short term trading. The logical way to apply this strategy for myself is in earnings plays since there is no play unless the fundamental criteria are met in the first place...and there are no problems of laggard stocks since all stocks move when there is an earnings report.
There had been other indicators I've discovered along the way mostly from reading Technical Analysis of Stocks and Commodities that combine the two as well..
After searching through the 100-200 or so daily lists of companies reporting, I usually end up with about 30 possible candidates. These are the best 10% in earnings growth LAST QUARTER and the best 20% of earnings growth current and next quarter... Of course a lot of filters come into play some of the better ones are screening for: ERG, Price Rank, Group Rank, Accumulation/Distribution increases in the LAST WEEK.. Volume 1/30, 2/30, 3/30, 10/30 150% above the average 30 day volume, Moving Average breakouts are of paramount importance in earnings plays.. Money Flow is an important indicator as well.
Another really good fundamental indicator is 30 day upward revision of earnings (Zacks) and the better still 7 day upward revision of earnings estimates (found in E-Search from Telescan). If your company has analyst's revising earnings upward, they are usually a fine chance for a positive report. It helps to reinforce this with Zacks change in strong buy/buy/hold/sell consensus... a move here from i.e. 2.0 to 1.5 in the last week will also mean the analysts are giving the company more 'buy' ratings.
After I come up with the 10% of companies that pass both the stringent fundamental and technical criteria, I put them in tracking portfolios to be scrutinized in the next WEEK or so.. First, they go into the REUTERS, DOW JONES or whatever real-time news feed I choose. This is important because like EESI,ERTS, lots of companies have news BEFORE they report and can pop at this time. TWLB was already reporting its earnings at 7:29 this morning (as I saw in REUTERS) and they were good.. This company was a buy at the open since it hadn't gapped up.
The Second Portfolio they go into is one I have in Internet Trader. This one has volume/price alerts that are extremely important. Sometimes I get no news from REUTERS, but the price/volume starts moving into my buy range and then the company is a buy at this point. Volume/Price alerts are integral for my momentum/earnings plays.
The Third Portfolio they go into are my 5 and 15 minutes intraday charting software... This is mostly for quick checks to spot trending companies that I've already had alerts on. They also go into my Telescan "autoscan" that scans the companies for any news related or technical changes.
There is a third group of companies I buy which are upgrades to BUY/STRONG BUY and sometimes even ACCUMULATE..and companies signing important contracts, higher dividends, stock buybacks or Moody upgrading their credit rating. You have to act pretty quickly on these because they tend to run up in seconds. When I do get about 60-120 seconds or so I put the COMPANY through a quick check in Metastock or better still run them through TELESCAN for an instant analysis of their Relative Performance, Insider Ranking, Fundamental ranking, Long and Short term Technical Ranking, and Analyst Ranking. You can't waste too much time here so I like the "pictoral' reading you get from TELESCAN. If and only if I have over 5 minutes (you can usually tell in the first 30 seconds how much time you have) I go to check the other indicators like MFI, Linear Regression Slopes, Stochastics, Wilder RSI, etc. Then the stock is bought, usually sold the same day towards the close...
Entry/Exit points obviously do not play a really big part in 'news' stocks.. You don't have time to figure that out, but you get in if the stock has not peaked above the 7 day moving average. Best bets are stocks slightly below 7 day moving average and trending upwards.
A 'newsworthy' item will obviously be the catalyst it needs for breaking through.
LCCI, CDM, CHML, WHC and some others are companies that for the most part can be unfamililar and that is what causes people to drop them.. This is a mistake, for it is these companies that surprise the most and can pop 2-3 points after they report. |
