Three Bails, One Buy

Hey 5-Star Trader,

I joined CNBC’s “The Exchange” to talk about earnings destruction candidates.

What does the “earnings destruction” pattern look like? 

This is the pattern that appears when a ticker is more likely to fall going into earnings, due to a lack of earnings anticipation. This can occur both pre-earnings, while the ticker is in the Hot Zone, and it also likely continues post-earnings.

This pattern sets up nicely when the ticker:

  • Previously experienced an extraordinary run, likely driven by the pandemic, hype, and retail sentiment, and that run has faded, substantially, with the ticker losing more than 30% since the previous all-time high

  • The ticker has shifted into a downward trend on the daily chart and is currently under key technical resistance

  • The ticker has shown disappointing moves post-earnings. This means that even if the company beat earnings, investors weren’t pleased and the stock fell post-report

  • The company may have missed several EPS estimates in a row

  • The ticker has experienced a major gap lower on a previous earnings report

Some of the names on my BAIL watchlist include:

  • PayPal (PYPL)
  • Carvana (CVNA)
  • Wayfair (W)

My BUY list includes:

  • Caterpillar (CAT)

To watch the full segment, click HERE.

-Danielle =)

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