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Use earnings surprise to find swing trades

Thursday, December 17, 2015 6:10

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If a stock has surprisingly good earnings and it was not rallying in to earnings, it tends to go up post earnings.

Post Earnings Announcement Drift (PEAD) is the name for this stock tendency. PEAD effect an be short term or long term. In long term stocks with history of continuously beating earnings estimate tend to go up.

You can use PEAD to find swing trades. Look for stock with big earnings surprise in recent quarters. They tend to rally on such surprise.

OME is an example of recent trade like that. OME had a 83% earnings surprise that resulted in gap up and 37% move in 19 days.

In order to find stocks like these you need to scan daily for earnings surprise and focus on stocks with constructive consolidation pre earnings that show positive reaction to earnings.

I use Marketsmith to scan for these kind of stocks. You can create a scan like this to find these stocks.

Many stocks in the scan continue to offer swing opportunities till next earnings season. If you do not have Marketsmith you can use free resource like Zacks to build your own list of earnings surprise candidates.

Earnings growth and earnings surprise is one of the strongest catalyst for stock price going up. If you want to make money swing trading focus like laser on stocks with big earnings surprise.

Source: http://stockbee.blogspot.com/2015/12/use-earnings-surprise-to-find-swing.html

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