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On September 9, Affirm Holdings (AFRM) reported its earnings outcomes after the bell. The market preferred what they heard and noticed, with the inventory climbing a nifty 37.5% from the prior day’s near the excessive the day after the numbers had been launched.
In the event you owned the inventory into the earnings report, you’ll possible be fairly happy. Nonetheless, as we see in lots of circumstances, merchants took benefit of the transfer greater, with the inventory pulling again properly on profit-taking and establishing for one more good commerce.
For instance, as you’ll be able to see within the chart above, the inventory bought as excessive as $126.46 the day after the earnings had been launched. Sooner or later later, euphoria had cooled with the inventory transferring all the way down to $102.30, a 19% pullback. That was proper close to key assist and offered a possibility to leap again in, particularly for these merchants who preferred what they noticed however didn’t personal the inventory into the earnings report, with the inventory transferring again up 17% in only a few days.
AFRM is just one instance of an organization that beat earnings expectations, confirmed a really optimistic response after which pulled again on profit-taking. I see this occur on a regular basis. One other instance is Dave & Buster’s (PLAY), which reported its earnings the identical day as AFRM, moved up sharply the subsequent day after which pulled again nearly 18% to cost assist earlier than heading up once more, gaining over 10% when it hit this previous Friday’s excessive.
Level being, as a substitute of taking the chance of holding a inventory into its earnings report, I like to look at the preliminary market response, see what occurs over the subsequent day or two, then get entangled in a commerce if it pulls again to key technical or worth assist, like AFRM and PLAY did.
Laborious to imagine, however we’re now simply 3 weeks or so away from Q3 earnings season getting underway. With it, we’ll see a variety of nice alternatives, particularly these corporations that report strong numbers and pullback to key assist ranges like I’ve demonstrated above. At EarningsBeats, we’ll proceed to determine these corporations that present the best promise. If you wish to get our FREE EarningsBeats Digest, simply click here and our Chief Market Strategist Tom Bowley will maintain you posted on vital earnings and market-related information.
At your service,
John Hopkins
EarningsBeats.com
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