EarningsBeats.com Digest

Published: Mon, 03/23/20

EarningsBeats.com Digest for March 23, 2020

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Searching for Stocks Being Accumulated

Our strategy of only trading stocks with strong revenue and EPS, along with solid relative strength will eventually prove quite useful again. But last quarter's earnings mean nothing right now in terms of market valuations because so much has changed in our environment. Companies are withdrawing future guidance as the economic picture is too unclear. As a result, I think it'll be more important to trade companies that show solid relative strength and are being accumulated. That last part in bold means that a company's accumulation/distribution line (AD Line) is rising. While that provides us no guarantees that a stock's price will move higher, it does provide me confidence that it's a better stock to consider than one that shows a falling AD Line. Here's an example:

The blue highlighted area above shows almost all hollow candles, indicating that ABC closed above its open nearly every day in March. Friday was an exception, but it was also options expiration day, which can be extremely volatile. The combination here of accelerating accumulation/distribution and excellent relative strength tells me that there's a lot of interest in the stock. So from a trading perspective, early morning weakness could provide an opportunity given the recent history of strong finishes.

Happy trading!

Tom Bowley

Chief Market Strategist

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