Trade Alert: Earnings, 11/7/2023

Entering two more trades after exiting two of yesterday's trades for 100%+ gains.

Off To A Good Start

Of our three earnings trades yesterday, we exited two today, at gains of $138% and 147%, respectively (We’re currently under water on the third trade, but that one doesn’t expire until the end of next week). A good start to the week using our current approach.

Our Current Approach

We’re still using these nine metrics…

• LikeFolio’s earnings score based on social data. The higher the number, the more bullish, the lower (more negative) the number, the more bearish.

• Portfolio Armor’s gauge of options market sentiment.

• Chartmill’s Setup rating. On a scale of 0-10, this is a measure of technical consolidation. For bullish trades, we want a high setup rating; for bearish trades, a lower one.

• Chartmill’s Valuation rating. On a scale of 0-10, this is a measure of fundamental valuation incorporating common rations like P/E, PEG, EBITDA/Enterprise Value, etc. For bullish trades, the higher the better the Valuation rating the better; for bearish trades, the reverse.

• Zacks Earnings ESP (Expected Surprise Prediction). This is a ratio of the most accurate analyst’s earnings estimate versus the consensus estimate.

• The Piotroski F-Score. A measure of financial strength on a scale from 0-9, with 9 being best.

• Recent insider transactions.

• RSI (Relative Strength Index). A technical measure of whether a stock is overbought or oversold. We’re looking for RSI levels below 70 for bullish trades and above 30 for bearish ones.

• Short Interest.

…But now we’re keeping track of each metric on a range from very bearish to very bullish, and tracking of them and their performance in a spreadsheet, a snippet of which is below.

And we’re using their relative outperformance or underperformance versus all the stocks that we’ve analyzed to adjust our weightings of each metric to determine which stocks we should be bullish or bearish on ahead of earnings.

The Stock We’re Bullish On

The number in parentheses represents our composite score for a stock, based on all the metrics: higher = more bullish, and lower (more negative) = more bearish.

Bullish Stock #1 (19.9)

1. Social data: +35.

2. PA Options sentiment: Very Bearish.

3. Setup rating: 3

4. Valuation rating: 1

5. F-Score: 5

6. Recent insider transaction(s): None since March.

7. Zacks ESP: -23.68%.

8. RSI: 30

9. Short Interest: 44.6%

(If you’re wondering why that stock has such a bullish composite rating despite some bearish individual metrics, it’s because large short interest percentage correlated with large returns last week.)

The Stock We’re Bearish On

Bearish Stock #1 (-13.3)

1. Social data: -55

2. PA options sentiment: Bearish

3. Setup rating: 6

4. Valuation rating: 4

5. F-Score: 4

6. Recent insider transactions: None since March.

7. Zacks ESP: -28.83%

8. RSI: 37

9. Short Interest: 7.41%

Details below.

Bullish Trade #1