Trade Alert: Earnings, 10/17/2023

Earnings Trades

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 Stocks We’re Bullish On

Bullish Stock #1

1. Social data: +61.

2. PA Options sentiment: Bullish.

3. Setup rating: 3

4. Zacks ESP: +0.09%

5. F-Score: 5

6. Recent insider transaction(s): Small open market sales in July, larger ones in March.

7. RSI: 62

Bullish Stock #2

1. Social data: +26.

2. PA Options sentiment: Neutral.

3. Setup rating: 7

4. Zacks ESP: 0% (Neutral)

5. F-Score: 5

6. Recent insider transaction(s): Open market sales in August; open market buys in April and May.

7. RSI: 44

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

Details below.

Bullish Trade #1