$UNFI recently reported earnings and traders over-reacted as they so often tend to do. In this case, the stock experienced a sharp selloff following the aftermarket announcement on the 6th, giving us a great opportunity to profit. Playing off the 14.50 support level, my “Recent Earnings Making New Lows” strategy got filled at 14.44 and had plenty of room for some really nice gains (+30%) over the next few days.
Aside: It is important to note that the earnings indicator on the chart is above the 6th, marking it as the “earnings day”, however, the “reaction day” was on the 7th. This is a critical distinction that most earnings calendars, charts, and stock market data outlets ignore, making it incredibly difficult to gather any meaningful analytics around earnings-related price action. This is something I plan to address in the next version of my app.
Another “Recent Earnings Making New Lows” trade this week was $MBT. You can see on the chart that the stock had a negative reaction to earnings a few weeks ago, gapping down in the morning of Nov 20th then selling off once again in the afternoon. It consolidated for a while before starting another leg down, where I got an entry on Dec 10th. My strategy was playing off of the previous day’s support at 7.15 and got an entry at 7.10. $MBT continued to provide just under 7% returns through the next day before bouncing into the week’s close.
I had more trades, but I’ll do one more here. $AEO was picked up on my “Earnings Day Making New Lows” strategy, which as the name implies, enters a trade on earnings day when the stock is making new lows. This is a pretty solid strategy for me, returning $5k on a $30k account with a %64 win rate in Q4, but we got a loss this week. This chart is pretty similar to the other two, where the earnings announcement was met with a sharp selloff. The only difference here was that traders bought into the initial reaction rather than continuing to sell. Luckily I have risk management built into all of my strategies, so I only took a 2.5% loss when it stopped out at 18.75.