What happened with this stock?
Chart 1
An every day “gotcha” during earnings season. The sell down was an early fake out before the earnings release. But if you have been using the TechniTrader entry rules and our controlled bracketed order, you would have been in on the buy side, enjoying that nice big gap gain.
Many swing, day, momentum and intraday traders scoff at the notion that they need to worry about any kind of fundamental. They believe all they need to short term trade is news or some sort of recommended stock list, OR worse, watching the early market activity and trying to guess what stock is going to move.
To be a successful short term trader you do need to keep any eye on a few fundamentals. Okay I figure most of you are going to stop reading about now but those who stay will learn something.
The fundamentals I am talking about are not what you think.
We are in the earliest stages of one of the most important earnings quarters for this year and yes, this fundamental matters. To really take advantage of the earnings season, you need to know in advance the approximate date for that earning report release on every stock you are considering for the Swing Style pre-Earnings Run Strategy.
Right now this is the most popular strategy pros are using and they are having a blast with it most of the time.
So let’s take a look at one of these pre-earnings runs in SYNA:
The fundamental called "earnings release date" was announced
You needed to know also that:
This is another critical piece of information that comes from, yes you guessed it! Fundamentals!
This stock had a great report for the quarter ending on June 30th. And it gave out great guidance. So when this stock starts forming a bottom after that report. As we enter October it is time to gear up for the earnings report that will come out in the second half of October.
Chart 2As the stock runs up on its pre-earnings activity as pros start buying in before the earnings announcement, what is also happening is that the TTVA and TTFF are showing heaving buying from institutions.
Chart 3Heavy profit taking occurs as the stock runs into the resistance high of May BUT over the next few days the stock consolidates. This may appear to be the end of the earnings run. However quiet accumulation is going on even while professional speculators are selling before the earnings news. The accumulation is substantial enough to hold the stock price steady in the consolidation.
Chart 4The giant funds that use dark pools and quiet accumulation to hide their huge lot buying from the professional speculators, high frequency trading firms, and floor traders have access to information about fundamentals that others do not. The entry was a GTC at the resistance level that pulled the stock back. This entry was determined based on the trading range activity of the stock prior to this short term bottom. Since there was evidence of quiet accumulation, the black candle was merely a gotcha as pro speculators exited just the day before the earnings announcement. However there was sufficient indication that the earnings were going to be strong, not weak.
Chart 5Using a few simple and easy to follow fundamentals coupled with leading indicators that reveal both speculative professional activity and quiet accumulation by the giant funds who buy for the long term help you take advantage of every opportunity to make swing trade profits.
Summary: you had two different kinds of runs to trade with this stock. The fundamentals of the earnings release dates, the guidance, etc played a key role in determining what this stock would do.
This is an advanced technique that should be used only by experienced traders. Novices and beginners should start with the easier patterns.
Trade wisely,
Martha Stokes, C.M.T.
Member of Market Technicians Association
Master Rated Technical Analyst: Decisions Unlimited, Inc.
Instructor and Developer of TechniTrader® Stock Market Courses
http://technitrader.com
MetaStock Partner
©2011 Decisions Unlimited, Inc.
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