As of 11/20/2024
Indus: 43,408 +139.53 +0.3%
Trans: 17,002 -26.31 -0.2%
Utils: 1,055 +1.25 +0.1%
Nasdaq: 18,966 -21.33 -0.1%
S&P 500: 5,917 +0.13 +0.0%
|
YTD
+15.2%
+6.9%
+19.7%
+26.3%
+24.1%
|
 46,000 or 43,000 by 12/01/202418,000 or 16,600 by 12/01/20241,075 or 1,000 by 12/01/202420,000 or 18,400 by 12/01/20246,100 or 5,800 by 12/01/2024 |
As of 11/20/2024
Indus: 43,408 +139.53 +0.3%
Trans: 17,002 -26.31 -0.2%
Utils: 1,055 +1.25 +0.1%
Nasdaq: 18,966 -21.33 -0.1%
S&P 500: 5,917 +0.13 +0.0%
|
YTD
+15.2%
+6.9%
+19.7%
+26.3%
+24.1%
| |
|
46,000 or 43,000 by 12/01/202418,000 or 16,600 by 12/01/20241,075 or 1,000 by 12/01/202420,000 or 18,400 by 12/01/20246,100 or 5,800 by 12/01/2024 | ||
For more information on this pattern, read
Encyclopedia of Chart Patterns Second Edition
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A bad earnings surprise is an event pattern in which a company issues an earnings announcement and the market interprets it as worse than expected. Nevertheless, in a bear market 61% have upward breakouts! In a bull market, 43% breakout upward. For those with downward breakouts, almost half (47%) bottom in one week, and 60% bottom in less than two weeks. Most of the time, a bad earnings surprise is nothing to be worried about providing the stock doesn't make a large intraday move (a tall price swing). Discovered by Thomas Bulkowski in the fall of 2003.
The above numbers are based on hundreds of perfect trades. See the glossary for definitions.
| Characteristic | Discussion |
| Price trend | Downward leading to the announcement for the best performance. |
| Market | This event pattern works best in a bear market. |
| Announcement | The company announces earnings and the stock makes a large downward move that day or the next if the market was closed. |
| Tall swing | Look for announcements in which price makes a large intraday 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. |
| Downward breakout | Since the price trend is downward leading to the pattern, trade only those announcements making a downward breakout. A breakout occurs when price closes below the lowest low posted on the announcement day. |
| Trading Tactic | Explanation | 
The Measure Rule
|
| Measure rule | See the figure to the right. On the announcement day, subtract the intraday low (B) from the high (A) and multiply it by the above "percentage meeting price target." Subtract the result from the intraday low (B) to get a price target (C). | |
| Confirmation | Wait for price to confirm the pattern because traders may push price up instead. A downward breakout (confirmation) happens when price closes below the low posted on the announcement day (point B in the figure to the right). | |
| Longer term | For investors or traders with a longer-term investment horizon, do nothing as the decline is likely to be small. However, one bad surprise is likely followed by another next quarter. | |
| Swingers | For swing traders, consider selling a holding to minimize the loss. If price gaps downward and the gap is small, price may cover the gap in a few days. | |
| Short | For aggressive traders: In a bear market, wait for the downward breakout and then short the stock. It may bottom in less than a week. | |
| Quick decline | Expect a quick but shallow decline. Almost half the time price bottoms in less than a week and then rebounds. | |
| More surprises | A bad earnings surprise follows a bad earnings surprise 74% of the time. |
The above figure shows an earnings announcement which the market took as bad news. Price began a strong move up at point A. When the bad earnings announcement came at B, the stock was overbought and ripe to fall. Price traded in a large price range on the announcement day and then tumbled thereafter. Price pulled back, allowing nimble traders to either exit a long position or add to a short position before the decline resumed. Price dropped from over 70 to 55 and change.
-- Thomas Bulkowski
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