(6) Getting Clues About Weakness Or Strength Of Stock
It is one of the most popular profit making tips to trade stocks during earnings season. Stock price can provide valuable clues to its investors. You just need to pay attention to price action leading up to earnings announcement.
It is a general sign or clue about the prevailing strength or weakness of the stock. It tells us about the next move of big investors or fund houses in a given script.
If a stock is appreciating with increased volume then it could be a sign of good strength. Similarly, if a stock is depreciating with increased volume then it could be a sign of possible weakness.
One you are sure about the possible trend after result announcement, you can make positions towards profitable side.
(7) Analyze Volume During Gap Trades
It is one of the best & significant tips to trade stocks during earnings season. Stocks can show gap trades, either upside or downside, depending on earnings report.
A stock may show gap up opening after a very favorable quarterly earnings. Similarly, a stock may show gap down opening after a poor quarterly earnings.
In such situations, you should pay attention to volume of shares traded as compared to normal traded volume. Generally, strong gap trades have volume greater than 1.5 times average volume (50-day).
However, to avoid being stuck in a fake gap trades you should wait for first hour of trading. It is a good strategy to let the share price settles down as well as to make sure that gap will hold.
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