Bad Earnings Surprise

An event pattern called a bad earnings surprise is where a company distributes an earnings announcement then the market defines it as worse than expected. Even in a bear market about 61% will have upward breakouts. There will be a 43% breakout upwards in a bull market. For others with a downward breakout, about 47% will bottom in a week  and another 60% will bottom in fewer than two. Many times a bad earnings surprise is considered nothing to fret about as long as the stock doesn’t make a big move in a day which would be a tall price swing.

When the bad earnings announcement comes, the stock is over-purchased and will be ready to fall. Prices were traded in a big price range then on the announcement day they came tumbling down. Prices then pulled back, letting seasoned traders to either leave a long position or add on to a short position before a decline resumes. Prices fell from over 70 to 55 and changed.

Comments are closed.