Three Post-Earnings Setups that Yield Monster Profits

Earnings season can be difficult to navigate for investors that do not understand the game. Last week I named 5 Easy Steps to Navigate Earnings Season Better than the Pros. This week I want to expand on that by helping you identify three easy post-earnings setups that can return huge profits for your portfolio.

The examples below are not your normal “last week” type stocks. I went all the way back to 2006 to find great examples of setups that work time and time again. Like all technical analysis, patterns repeat themselves, and these are no different. During ever earnings season gems like these stocks below will appear and with a little practice your portfolio will be ready to capitalize on their future success.

The Descending Channel

Example stock, Netflix (NFLX) February 2010.
I actually posted this setup with the original buypoint way back when it took place. After Netflix gapped to fresh highs, the stock consolidated and formed a nice channel that presented a fantastic buypoint at $62. This was the start of a huge run that has lead Netflix all the way up to $248 in 2011, or over 400%.

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Bull Flag

Example stock, Apple (AAPL) April 2007.
Bull flags come in many shapes and forms. While this Apple setup could be considered a simple horizontal consolidation, the setup is very clear to identify. After posting earnings price volatility drops alongside volume as the stock trends sideways. Institutional buyers then return and push the stock to fresh highs, which is also the buypoint. In Apple’s case the stock hit its buypoint of $102.60 on 5/7/07 which was the start of a multi-year uptrend. As many investors know, Apple now trades above $350 a share, marking a 250% move since May 2007.

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Multi-Week Base

Example stock, Intercontinental Exchange (ICE) September 2006.
What makes this chart so compelling is its simplicity. After posting earnings and surging into the $70s, ICE pulled back and formed a basic two week base with a buypoint of $88. The stock did not trade back into its gap range and proceeded to break out through $88 on increased volume. ICE eventually peaked at $194.92 on 12/26/2007 which allowed investors to capitalize on a 150% return in just over a year.

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Comments

  1. says

    Two facts, as food for thought:
    - Only 202 of the 500 biggest companies in the United States in 1980 were still in existence 20 years later.
    - On December 29, 1989, Tokyo’s Nikkei stock average reached its all-time peak of 38,915.87. Twenty years later, the Nikkei has never again reached that level — and, in 2009, reached a new low of 7,054.98.