Do You Know This Earnings Pattern?

It’s hard to suggest entering a new trade on this Friday.

The SPY and QQQ are at the highs for the week and year and both had a big up day on Thursday.

Traders are likely to ‘hold’ or take profits in QQQ stocks today, and IWM is still under major resistance so its ability to rally is questionable.

However, today’s stock has a pattern you should know regardless of today’s market performance!

The pattern I’m referring to is an earnings day breakout, and Corning Inc. (GLW) is a good example of it right now.

The earnings day in this pattern is one that occurred in the past, not today.

The earnings day should have created a strong gap higher on the actual day of the announcement.

You’ll see this day in early January in the GLW chart below.

The next step in the pattern is for the stock to consolidate within that day’s range for several days or even weeks.

And finally, the stock should breakout of the consolidation and the earnings day range. You’ll see GLW did that in early February.  

After a successful breakout like GLW, any retracement to the breakout level provides a potential retracement trade.

GLW fits this pattern nicely.

The recent rally off of its low on March 8th has now consolidated with a well-defined support level at $33.90. This level should serve as a good stop. The low of the correction at $33.50 could also serve as a good stop.

I would not enter on a move higher today for the reasons mentioned above.

However, I would consider an entry if it pulls back to $34.50 today.

Next week is a different story, if it breaks out over $35 next week, I would not expect to get a chance at a $34.50 entry, and the entry becomes a breakout over $35.  

There are a lot of these earnings breakout patterns out there!

In fact, if you took advantage of my ZS trade from February 26th, then you’re up about 40% on that $51 entry, and you’ve experienced the earning pop, consolidate, and then breakout again!

Check out the chart below.

Trade smart,

Rick Nartarian, Chief Investment Officer
The American Investor Daily