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The Portfolio Armor Substack
The Portfolio Armor Substack
Trade Alert: Earnings, 10/16/2023

Trade Alert: Earnings, 10/16/2023

One bearish, and one bullish trade.

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Portfolio Armor
Oct 16, 2023
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The Portfolio Armor Substack
The Portfolio Armor Substack
Trade Alert: Earnings, 10/16/2023
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A packed earnings calendar this week.

Entering Q4 Earnings Season

Our approach to earnings trades this quarter will apply some lessons from last quarter. Recall we ended last quarter looking at seven different metrics for earnings trades:

  • LikeFolio’s earnings score based on social data. The higher the number, the more bullish, the lower (more negative) the number, the more bearish.

  • Portfolio Armor’s gauge of options market sentiment.

  • Chartmill’s Setup rating. On a scale of 1-10, this is a measure of technical consolidation. For bullish trades, we want a high setup rating; for bearish trades, a lower one.

  • Zacks Earnings ESP (Expected Surprise Prediction). This is a ratio of the most accurate analyst’s earnings estimate versus the consensus estimate.

  • The Piotroski F-Score. A measure of financial strength on a scale from 0-9, with 9 being best.

  • Recent insider transactions.

  • RSI (Relative Strength Index). A technical measure of whether a stock is overbought or oversold. We’re looking for RSI levels below 70 for bullish trades and above 30 for bearish ones.

None of these metrics alone are dispositive, but we’ll consider the preponderance of evidence when placing our bets. We’ve got bets on two names today, one bearish and one bullish. Here’s how they stack up on our seven metrics.

The Stock We’re Bearish On

  1. Social data: -26.

  2. PA Options sentiment: Bearish.

  3. Setup rating: 4

  4. Zacks ESP: 0% (Neutral)

  5. F-Score: 5

  6. Recent insider transaction(s): none in last 12 months

  7. RSI: 41

The Stock We’re Bullish On

  1. Social data: +83.

  2. PA Options sentiment: Bullish.

  3. Setup rating: 3

  4. Zacks ESP: -0.13%

  5. F-Score: 7

  6. Recent insider transaction(s): open market sales in July and August, but larger open market buys in March.

  7. RSI: 24 (oversold)

Based on the data above, we’re going to place a moderately bearish options trade on the first stock, and an aggressively bullish trade on the second one.

Details below.

Our Bearish Trade

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