This is What I'm Talking About

Yesterday when I talked about maybe playing a few earnings leaks  (and the ultra-high success rate we had last time we did this) it is precisely for this reason, information is routinely leaked on Wall Street.

THIS IS JUST ONE EXAMPLE


However, over the many years of using 3C, I've seen this too many times in instances in which you just can't argue. Wall Street is full of holes and favors and it's on a daily, hourly, minute basis, not just once in awhile.

The reason the 3C earnings trades were so successful is because I wasn't looking for divergences, I was looking for divergences that jumped off the chart in strange places and at strange times. Not every stock will have this kind of activity, in fact relatively few, but when you see it, it's obvious.

Technical Analysis has always been about trying to uncover the footsteps of the big boys and then follow in them and that is why 3C has been successful in these areas, if you understand how to use the data properly. I showed you AA last night, lets take a look at another.

LEN reported this morning a huge upside surprise of 466% above consensus, lets look at the chart from yesterday, the last time any action would have been taken on earnings reported this morning.

On Monday into the close, there was a small negative divergence knocking price down Tuesday. Tuesday traded in a narrow range mostly between $18.80 and $19.10, yet look at 3C 5 min (this is also visible on the 1 min. chart) starting at 11 a.m. there's a positive divergence, by noon time it had gone into a large leading positive divergence, yet the stock closed down for the day (-2.63%). This morning they beat big time, LEN gaps up and we see a negative divergence right on the open as profits are booked.

I can't say definitively there was a leak, I don't have that information. However charts like this that stand out are the type we had so much success with last time we traded something like 22 earnings with a success rate in the 90% range. It's hard to argue with a success rate that high, it's not a normal or average rate even for the best stock picker.

In conclusion, I mentioned above, "3C has been successful in these areas, if you understand how to use the data properly". 

This is what I mean by that statement, too many people have the wrong idea of how the market functions; they see big volume and a big price move up and assume that smart money is buying an equity so they follow their volume surge indicators and think they are following smart money. WRONG! Wall Street would never show you their hand, they will however show you what they want you to believe. If you look at the chart above, it's obvious that the buying was done at depressed levels in a narrow range, the big move up this morning and the volume is a sign of them unloading their position into demand, which allows them to unload the position into higher prices. This is also why I tell you to keep your cards close, placing limit orders and such on the books with your brokers is showing your hand, it's not a good trading strategy.

So, I'm off to look for some earnings plays.