Trade Alert: Earnings, 3/4/2024

Four bullish and four bearish trades for this week.

Note: these trades are based in part on the data we derived from crunching the numbers on our composite score over the weekend.

I decided to post all of this week’s trades today to capture as much of the 5-day returns as possible and, secondarily, to reduce the number of separate trade alerts hitting your inbox. If there are a lot more trades in future weeks, I reserve the right to break them up in multiple posts.

Our Current Approach

Recall that we’re using these ten factors when evaluating earnings trades,

• 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.

• Zacks Ranking. This goes from 1 to 5, with #1 ranked stocks being their most bullish ones. They grade on a bell curve, so most stocks we see end up with their #3 (neutral) ranking.

• 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. RSI levels above 70 suggest a stock is overbought and and RSI levels below 30 suggest it’s over sold.

• Short Interest.

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

And we’re using their relative outperformance or underperformance versus all of 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 Stocks 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 (4.2)

1. Social data: +51

2. PA Options sentiment: Very Bullish.

3. Setup rating: 3

4. Valuation rating: 5

5. F-Score: 8

6. Recent insider transaction(s): Net open market sales peaking in August, but also some in January.

7. Zacks ESP: -1.25%

8. Zacks Ranking: 1

9. RSI: 77

10. Short Interest: 11.9%

Note: we only had one trade previously with a composite score in the 4 range, and it did poorly, but I consider that too small a sample to pass on this one.

Bullish Stock #2 (5.2)

1. Social data: +46

2. PA Options sentiment: Neutral.

3. Setup rating: 5

4. Valuation rating: 4

5. F-Score: 7

6. Recent insider transaction(s): Net open market sales in peaking in February.

7. Zacks ESP: 0%

8. Zacks Ranking: 3

9. RSI: 62

10. Short Interest: 6.4%

Bullish Stock #3 (8.1)

1. Social data: -44

2. PA Options sentiment: Very Bearish.

3. Setup rating: 3

4. Valuation rating: 0

5. F-Score: 2

6. Recent insider transaction(s): Net open market purchases in May and November. No open market sales in the past 12 months.

7. Zacks ESP: -55.1%

8. Zacks Ranking: 4

9. RSI: 52

10. Short Interest: 24.7%

Note: this is a company we successfully bet against (at a higher price) last summer.

Bullish Stock #4 (8.6)

1. Social data: -61

2. PA Options sentiment: Very Bearish.

3. Setup rating: 5

4. Valuation rating: 0

5. F-Score: 3

6. Recent insider transaction(s): Net open market sales peaking in November.

7. Zacks ESP: 0%

8. Zacks Ranking: 2

9. RSI: 44

10. Short Interest: 2.7%

The Stocks We’re Bearish 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.

Bearish Stock #1 (0)

1. Social data: +62

2. PA Options sentiment: Very Bearish.

3. Setup rating: 6

4. Valuation rating: 1

5. F-Score: 2

6. Recent insider transaction(s): Net open market sales in August.

7. Zacks ESP: 0%

8. Zacks Ranking: 3

9. RSI: 53

10. Short Interest: 8.75%

Bearish Stock #2 (-1)

1. Social data: +23

2. PA Options sentiment: Very Bearish.

3. Setup rating: 8

4. Valuation rating: 2

5. F-Score: 5

6. Recent insider transaction(s): Net open market sales peaking in November.

7. Zacks ESP: 23.08%

8. Zacks Ranking: 2

9. RSI: 53

10. Short Interest: 7.28%

Bearish Stock #3 (-0.5)

1. Social data: +39

2. PA Options sentiment: Bullish.

3. Setup rating: 6

4. Valuation rating: 7

5. F-Score: 7

6. Recent insider transaction(s): Net open market sales peaking last April.

7. Zacks ESP: 0%

8. Zacks Ranking: 4

9. RSI: 64

10. Short Interest: 3.31%

Bearish Stock #4 (-3.6)

1. Social data: -40

2. PA Options sentiment: Very Bearish.

3. Setup rating: 7

4. Valuation rating: 1

5. F-Score: 5

6. Recent insider transaction(s): Net open market sales peaking in July.

7. Zacks ESP: NA%

8. Zacks Ranking: NA

9. RSI: 57

10. Short Interest: 6.1%

Note: we haven’t had any bearish trades in the -3 range before.

Details below, but before we get to that, a heads up for subscribers: I updated our Bitcoin-related trades from Friday; please see the post below for the updated trades.

This week’s earnings trades are below.

Bullish Trade #1