Earnings for individual stocks is one of the biggest potential catalysts, both up and down. We use a rating system, and the earnings reports are a big part of the ratings. Very good earnings, and the trend of the recent earnings reports are important, but the price/volume reaction to the earnings is by far the most important situation to watch. The great reaction to the earnings, a big increase in relative volume (relative = check the chart over the last few upwaves and downwaves), and the close near the high of the day (bar), brings a very high probability of a strong stock for at least a few days. What does that mean? It means if you’re long, continuing to hold at least some of the shares is a higher probability approach. And it also means that the reaction buy setups (selloffs) have a much higher probability of a successful outcome for a while longer.
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