Can We Trade With Confidence In Reporting Period


22 Nov
22Nov

Most of the traders avoid trading the stocks a few days before and after the earning reports since stocks tend to move in unpredictable direction (until now).

I decided to see if I can use the 5_Layer model to predict the stock movement just before the earning date. 

Last month on the 24 Oct 2019 I picked up 12 stocks randomly,  on the day before earnings from Yahoo calendar. They all reported on the 25 Oct, a day after. Here is the list: PFS, WETF, VTR, ITW, VFC, BY, FIX, AON, B, WY, PSX, SBSI.

In the example  here, I presented the forecast from July 2019 for 4 month ahead,for each of the stocks, using 4 layers out of the 5_Layer model, up to 24 Oct, leaving the forecast visible for a month ahead.

In the post below, I come back to each of the stocks and analyze how was the performance of the model, looking on the following two topics:

  • Can we use the Bi-weekly (Orange/Red) model to  predict the direction of the stock a few days after the earning report?
  • Can we use the Monthly (Green) cycle to predict the direction of the stock a month after the earning report?

I left the analysis of the cycles on the slide, as was published a month ago.

Conclusions:

The 5_Layer model in this case of 12 stocks was correct in 91%(Bi-Weekly) / 83% (Monthly) for the day of reporting when using 4 months ahead, and 100% when using a forecast one day before the reprting.


SYMBOL: PFS

Monthly cycle:   predicted: DOWN,         Real price move: DOWN                                                                                       Score: 1/1

B-Weekly cycle: predicted: DOWN.         Real price move: DOWN for a week, UP for a week, DOWN for two weeks, Score: 1/1


SYMBOL: WETF

Monthly cycle:   predicted: DOWN,        Real price move: DOWN                                                                                       Score: 2/2

B-Weekly cycle: predicted: DOWN.        Real price move: DOWN for a week, UP for a week, DOWN for two weeks, Score: 2/2


SYMBOL: VTR

Monthly cycle:   predicted: DOWN,        Real price move: DOWN                                                                                       Score: 3/3

B-Weekly cycle: predicted: DOWN.        Real price move: DOWN                                                                                       Score: 3/3

SYMBOL: ITW

Monthly cycle:   predicted: UP,        Real price move: UP                                                                                             Score: 4/4

B-Weekly cycle: predicted: UP.        Real price move: UP                                                                                             Score: 4/4


SYMBOL: VFC

Monthly cycle:   predicted: UP,        Real price move: UP                                                                                       Score: 5/5

B-Weekly cycle: predicted: DOWN and then UP.        Real price move: DOWN and then UP                            Score: 5/5

SYMBOL: BY

Monthly cycle:   predicted: UP,                           Real price move: UP                                                    Score: 6/6

B-Weekly cycle: predicted: UP. then DOWN      Real price move: UP then DOWN                             Score: 6/6

SYMBOL: FIX

Monthly cycle:   predicted: DOWN                     Real price move: UP  then DOWN                            Score: 6/7 (* miss)

B-Weekly cycle: predicted: DOWN                     Real price move: UP then DOWN                             Score: 6/7 (* miss)

(*) An updated forecast made on the 24 Oct shows the correct directions

Here is FIX forecast from 24 Oct:


SYMBOL: AON

Monthly cycle:   predicted: UP                           Real price move: UP                               Score: 7/8

B-Weekly cycle: predicted: UP                           Real price move: UP                               Score: 7/8

SYMBOL: B

Monthly cycle:   predicted: CIT-DOWN                     Real price move: CIT-DOWN                            Score: 8/9

B-Weekly cycle: predicted: CIT-DOWN                     Real price move: CIT-DOWN                             Score: 8/9

SYMBOL: WY

Monthly cycle:   predicted: UP                     Real price move: UP                               Score: 9/10

B-Weekly cycle: predicted: UP                     Real price move: UP                               Score: 9/10

SYMBOL: PSX

Monthly cycle:   predicted: DOWN                     Real price move: UP  then DOWN                            Score: 9/11 (* miss)

B-Weekly cycle: predicted: CIT-DOWN               Real price move: CIT-DOWN                                     Score: 10/11

(*) An updated forecast made on the 24 Oct shows the correct directions

Here is PSX forecast from 24 Oct:



SYMBOL: SBSI

Monthly cycle:   predicted: CIT-UP                     Real price move: CIT-UP                                    Score: 10/12

B-Weekly cycle: predicted: CIT-DOWN               Real price move: CIT-DOWN                             Score: 11/12

Total Scores:

Monthly cycle for 4 months ahead (*) : 10 out of 12, (83%)  missed on FIX, stock jumped after reports, while cycle shows CIT down. Also missed on PSX, too early signal down.

B-Weekly cycle 4 months ahead (*): 11 out of 12, ,(91%) missed on FIX, stock jumped after reports, while cycle shows CIT down.


Conclusions:

The 5_Layer model in this case of 12 stocks was correct in 91%(Bi-Weekly) / 83% (Monthly) for the day of reporting when using 4 months ahead, and 100% when using a forecast one day before.

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