The market has been under fire for the past two weeks. Volatility has spiked. Traders have bailed as they've sold on rallies. Bad news is bad news. Good news is bad news. No one wants to touch stocks!
We can take a look at Netflix as a great example of the mindset of traders at the moment as it reported strong earnings, gapped up sharply on strong volume then a day later gave all those gains back.
We can ask ourselves - if the overall market environment was bullish, would Netflix's gains have held? Possibly, though there's no way of telling. But we may well find that the pullback in the stock presents a very nice buying opportunity once things settle down; it just might take a lot of patience because we have found time and again that companies that report strong numbers get the attention of traders since they like to gravitate to those stocks that beat expectations.
I bring this up since thousands of companies will be reporting earnings over the next 3-4 weeks and there could be some great opportunities once the market puts in a near term bottom. This could be especially true as we move into November and December, two months that have historically been quite bullish. In fact, here is the performance from late October until December 31 of each of the past 4 years with the jury still out for 2018:
2014 - +6%
2015 - +2.2%
2016 - +4.6%
2017 - +4.3%
2018 - ???
Even if the market ends up with negative performance between now and year end, traders who focus on the "best of the best" - those companies that beat earnings expectations - have a better chance of out-performing the overall market. In fact, we will be conducting one of our quarterly earnings webinars this Monday, October 22, titled "Preparing for a Profitable Year End," where we will discuss which sectors/stocks are likely to lead the way into year end. We'll also discuss what stocks might rally substantially based on history and strong earnings. And we'll share with webinar participants how we develop our Strong Earnings Chart List, a powerful tool in any market environment. If you want to join Tom Bowley and me for this FREE and highly educational event, just click here.
When the market is down and out, it becomes more difficult to make successful, profitable trades. But if you turn your attention to those companies that out-perform, you'll increase the odds of making some nice scores.
At your service,
John Hopkins
EarningsBeats
