EarningsBeats.com Digest for April 22, 2022
|
Upcoming Earnings ChartLists
Our ChartLists for this week's upcoming earnings are now available. Click below to access the ChartLists. If you like what you see, consider joining us for a NO COST 30-day trial to receive access to our member-exclusive content.
The Ugliest Candle Of Them All
Batten down the hatches! When I see the combination of a negative divergence (which signals slowing price momentum) and a nasty, high-volume, reversing candle, I EXIT - no questions asked! I don't care if the stock goes higher or not. The risk is too great to hold from a TRADING perspective. Longer-term, such a stock could be fine,
but short-term? I'm getting out. Yesterday, Steel Dynamics (STLD) was sailing along after reporting excellent quarterly earnings. After all, quarterly EPS came in at $6.02 vs. $5.58 (estimate). Revenues were strong too - $5.57 billion vs. $5.23 billion (estimate). Intraday, STLD rose as much as 9% to 100.37 in the morning, only to reverse and finish the day at 93.24, just 12 cents from where it started the day. When a company finishes the day at or very near
where it starts the day, it's referred to as a "doji" candlestick, which can be a reversing candle after an extended trend. But this wasn't any doji, it was a "gravestone doji". Check it out:
Tops and bottoms form many times when you see long "tails" like the one on this candlestick. Tails mark "intraday" highs or lows. In essence, what this chart is saying is that STLD had a long, extended run, which was losing momentum (negative divergence - pink lines show lower PPO with higher price action). And the gravestone doji shows a massive reversal on much-heavier-than-normal volume. I've drawn two levels of price support where I
expect STLD to trade down to - in time. We could see further short-term strength in the very near-term, but I believe the short-term top is now in at 100.37, so any strength could set up a better reward-to-risk SHORT entry for an anticipated drop ahead. Time will tell, but don't be shocked if STLD sees a 50-day SMA test to "reset" its PPO near the zero line.
|
Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
|
|
|
|
