Good Earnings Surprise

As of 10/23/2020

Indus: 28,336 -28.09 -0.1%

Trans: 11,880 +131.58 +1.1%

Utils: 894 +2.40 +0.3%

Nasdaq: 11,548 +42.27 +0.4%

S&P 500: 3,465 +11.90 +0.3%

YTD

-0.7%

+9.0%

+1.7%

+28.7%

+7.3%

Targets Overview: 09/29/2020

29,300 or 27,400 by 11/01/2020

12,000 or 11,000 by 11/01/2020

915 or 840 by 11/01/2020

12,800 or 11,300 by 11/01/2020

3,700 or 3,400 by 11/01/2020

CPI (updated daily): Arrows

on 9/25/20

As of 10/23/2020

Indus: 28,336 -28.09 -0.1%

Trans: 11,880 +131.58 +1.1%

Utils: 894 +2.40 +0.3%

Nasdaq: 11,548 +42.27 +0.4%

S&P 500: 3,465 +11.90 +0.3%

YTD

-0.7%

+9.0%

+1.7%

+28.7%

+7.3%

Targets Overview: 09/29/2020

29,300 or 27,400 by 11/01/2020

12,000 or 11,000 by 11/01/2020

915 or 840 by 11/01/2020

12,800 or 11,300 by 11/01/2020

3,700 or 3,400 by 11/01/2020

CPI (updated daily): Arrows

on 9/25/20

Bulkowski on Good Earnings Surprises

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A good earnings surprise is an event pattern in which a company issues an earnings announcement and the market interprets it as better than expected. But, almost half peak after rising 10% in less than 2 weeks. Discovered by Thomas Bulkowski in the fall of 2003.

Good Earnings Surprise: Important Bull Market Results

Overall performance rank (1 is best): 5 out of 6

Break even failure rate: 29%

Average rise: 24%

Throwback rate: 41%

Percentage meeting price target: 76%

The above numbers are based on hundreds of perfect trades. See the glossary for definitions.

Good Earnings Surprise: Identification Guidelines

Characteristic	Discussion
Price trend	Upward leading to the announcement for the best performance.
Market	This event pattern works best in a bull market.
Announcement	The company announces earnings and the stock makes a large upward move that day or the next if the market was closed.
Tall swing	Look for announcements in which price makes a large intraday price swing, 2 or 3 times the average daily intraday price range over the last month.
Yearly low	For best performance, select announcements that occur within a third of the yearly low, just make sure price is trending upward.
Upward breakout	A breakout occurs when price closes above the high posted on the announcement day.
Volume	Select patterns with heavy announcement day volume, above the 30-day average.

Good Earnings Surprise: Trading Tips

Trading Tactic	Explanation	The Measure Rule
Measure rule	On the announcement day, subtract the intraday low (point B) from the high (A) and multiply the difference by the above “percentage meeting price target.” Add the result to the intraday high (A) to get a price target (C).
Confirmation	Wait for price to confirm the pattern because traders may push price down instead. An upward breakout (confirmation) happens when price closes above the high posted on the announcement day (point A in the figure to the right).
Trend	Trade with the trend. Buy an upward breakout only if the market and industry are trending higher.
Swingers	Place an order to sell if the stock hits its price target.
Caution	Failure rates are high. Almost half (48%) rise just 10% before tumbling and that occurs in less than 2 weeks.

Good Earnings Surprise: Example

The above figure shows an example of a good earnings announcement event pattern. Price makes a large price swing when earnings came in better than expected. Price climbed 7%. But, over the next three days, price retraced its gain and staged a downward breakout (price closed below the red line). The following day, price recovered and climbed to a new high. Then, as is so common with this event pattern, price rounded over and headed back down during the next several weeks.