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Focus on Companies That Beat Earnings Expectations

When the market is in turmoil, you need to look for any advantage you can get to help you make successful trades. This includes zeroing in on those companies that beat both top- and bottom-line expectations and also guide higher. An example of this is Ulta Beauty (ULTA), which reported its numbers on Thursday and included a positive outlook, with the stock getting a nice bump higher after its earnings release.

As you can see, the stock rose by over 16% from the prior day low to its high the day after earnings were released, showing traders are more than happy to reward those companies that exceed expectations.

Another stock that rose sharply on its earnings report was Macy’s (M), which surprised the market with its better-than-expected numbers.

In the case of M, the stock has risen by almost 35% from the prior day low to its high in just two days after earnings were released.

Those companies that not only beat top and bottom line expectations, but also guide higher, become targets of traders who are looking for any edge they can get in times of uncertainty. This includes looking for entry levels on pullbacks that could pay off if a stock resumes its upward movement after any selling. For example, in the case of Macy’s, a pullback to the 20-day moving average (currently at $21.42) and then again near $20 would represent sizable discounts to the current price.

Right now, we’re seeing an oversold market relief rally, but there’s no guarantee the gains will hold. Thus the importance of identifying those companies that exceed expectations so you can be in a position to take advantage of lower prices if profits are taken. In fact, we regularly provide our members with our Strong Earnings ChartList (SECL), which currently contains 469 companies that have beaten Wall Street Consensus estimates as to both revenues and earnings, are liquid and have solid technical charts. If you would like to get access to all 469 companies, just click here to sign up for our FREE EarningsBeats Digest (EBD) and we will include a link to the SECL in our next EBD, which will be published this upcoming Wednesday.

Hope you enjoy the holiday weekend!

At your service,

John Hopkins

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