Yesterday brought a big day for the markets – I was surprised by how much they went up. After a weak September in which the S&P 500 fell by 10% the stock market averages have been rallying into October into the start of this week’s earnings season. Historically stocks tend to rally into earnings and then start another pullback or pause once they come to an end. What happens is traders buy individual stocks on the expectations of good earnings news and sell once the news come out. That’s why often you’ll see individual stocks gap up and fade on earnings day.
We’re going to get earnings from JPM, Blackrock, and Delta today. Bank of America, Goldman Sachs, and Wells Fargo are tomorrow.
This year earnings are actually going to be bad. Companies are expected to announce an overall drop of 20.5% in their earnings for the third quarter from a year ago. This is better than the 50% drop they saw in the 2nd quarter, but it’s still really bad. However, they will be reported as good. What CNBC and the news does is report whether or not companies “beat” the analyst earnings predictions and those predictions are typically set low enough so that they can create good “surprises.”
It’s a bit of BS – investors should buy stocks with growing earnings or good dividends and low valuations to beat the markets in the long-run, but most small traders only focus on news stories and earnings stories of “surprises” gets them excited. But no matter. Take a look at the chart of Apple, Inc (NASDAQ: AAPL) as it is one stock that went up a lot yesterday.
AAPL went up over 6.35% yesterday. It pulled back hard in September, but after that dip it consolidated as its 20-day Bollinger Bands came together. That suggested a big move was coming and the stock broke out to the upside Monday. Another stock that still has narrow Bollinger Bands is Tesla Inc. (NASDAQ: TSLA).
As incredible as it is TSLA is lined up again for a potential breakout. One stock that I own that did breakout recently is silver stock Aftermath Silver (OTCMKTS: AAGFF).
Notice how low the Bollinger Band width got into October after it got above 100 in August. The stock went from 55 to 71 cents in three days. That’s a fast gain. My top stock for this month, Silver Dollar Resources, has moved up to trade at resistance too, but is still in a consolidation with tight Bollinger Bands.
Silver Dollar Resources (OTCMKTS: SLVDF) has traded up nicely this month and is now under resistance. As you can see from the chart it is a new stock that has only been trading now since June. You can see the details on the company and the stock in my first blog post on it here.
I’m really excited in what I think is a coming rally in gold, silver, and mining stocks, because of a “golden triangle” pattern now on the gold chart. I talked about it in this video I posted Monday.
Also if you want to learn more about my trading methods grab my book Strategic Stock Trading, because Amazon is running a time limited deep discount special today. Grab it here.
-Mike
Disclosure: Mike Swanson owns shares of Aftermath Silver and Silver Dollar Resources, Inc. Because they are small cap stocks with a market cap of less than $100 million he has put himself on a trading blackout on both stocks and will not buy or sell a share of them for at least 30-days from the date of this post. Wallstreetwindow.com, is owned by Timingwallstreet, Inc., which is being compensated by a third party (Leadgopher LLC DBA Pinnacle Ad Network) to conduct an investor awareness advertising and marketing campaign for Silver Dollar Resources, Inc. This third party paid Timingwallstreet Inc., $23,000 to produce and disseminate this and other similar articles and send traffic to them through paid advertising online campaigns for 30 days beginning October 1, 2020. This compensation should be viewed as a major conflict with our ability to be unbiased, more specifically: This communication is for entertainment purposes only. Never invest purely based on our communication. For more on trading risks read our policy statement by clicking here.
