Yesterday I introduced you to the approach of avoiding "crowded" stocks ahead of earnings. The reason is simple. Stocks with extremely optimistic sentiment are often "priced for perfection" and find it harder to impress the "crowd".
I didn't go into the obvious, which is what happens when a stock is on the opposite end of the sentiment spectrum.
While harder to find sometimes, stocks that are among the less crowded or even "most hated" by comparison offer opportunities for investors.
Take for example Intel Corp (INTC).
Last week, the once giant (and most loved) company of the semiconductor sector announced its quarterly earnings results. Frankly, most investors wouldn't have known as they were too busy watching the crowd favorites like Microsoft corp (MSFT) and Alphabet Inc. (GOOGL) that had reported two days prior. Hell, even Mcdonald's Corp (MCD) and Mastercard Inc (MA) were reported more heavily than Intel.
You get the idea, there was no crowd waiting on Intel's report.
The earnings results were good, but not blockbuster. They beat earnings per share and revenue estimates and provided little guidance.
Guess what that got them. One of the best post-earnings rallies that we've seen from the earnings season so far. Intel shares shot more than 8% higher in the two days after the "surprise."
Yesterday's long list gave you access to some of the sentiment measures that I watch ahead of an earnings report.
Let me be clear.
These are not the only things that I watch. I also look at short interest, price patterns, past earnings results and reactions, options activity, and other signs of where The Street's expectations are set.
Let's lower the microscope on those 30 stocks to narrow things down to a five-stock watchlist.
Tomorrow I'm going to focus on two of these companies. We'll dive deeper into the sentiment picture to narrow things down to a bullish and bearish opportunity for you.
Here are a few "hints".
Disney (DIS)
The "Mouse House" will report their results next Wednesday after the market close.
I'll give you one thing that hit my radar this week and let your imagination go from there.
We'll pick up that discussion tomorrow.
One more for you.
Uber reported their results this morning.
The company beat The Street's earnings per share expectations but missed its revenue expectations.
If you check yesterday's table, UBER is the second most recommended stock by the analyst community. That's a crowded trade.
Lyft (LYFT) however...
We'll hit these and a few others in more detail.
Final note, note that I said Uber is the second most loved stock reporting over the next ten days.
First on the list, Amazon.com (AMZN) which reports this Thursday (More details on this to come before they report).
Make sure you check in with me before all these reports.
CJ
The post Could Trading Earnings Season Really Be this Easy? appeared first on Penny Hawk.
About the Author
Chris Johnson (“CJ”), a seasoned equity and options analyst with nearly 30 years of experience, is celebrated for his quantitative expertise in quantifying investors’ sentiment to navigate Wall Street with a deeply rooted technical and contrarian trading style.