Why running ahead of earnings is generally not a good thing
QLYS provides us with an example of 2 great lessons: the importance of learning how to analyze bases and second, why running ahead of earnings is usually a bad thing.
First, QLYS recently formed and broke out of a base on base pattern. Typically in a base on base pattern, the 2nd pattern should be shorter and shallower than the first. Not the case here. The second base was about 17% deep and 8 weeks long whereas the first is only about 11% deep and 6 weeks long. The 2nd pattern doesn’t even quality as a flat base because it is too deep for it.
Second, more often than not when I see stocks run ahead of earnings, especially after they’ve already had a nice move like this (QLYS has doubled over the last 6 months) it typically isn’t a good sign. I’ve this type of move happen enough where when I see it I’m usually getting defensive in a hurry. I don’t have a sell rule around it but I do have it classified as a signal that warrants caution, analysis, and a decision to be made. Today’s move ahead of earnings was a have been taken as sell signal. So far after hours it is down over -21%.
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First, QLYS recently formed and broke out of a base on base pattern. Typically in a base on base pattern, the 2nd pattern should be shorter and shallower than the first. Not the case here. The second base was about 17% deep and 8 weeks long whereas the first is only about 11% deep and 6 weeks long. The 2nd pattern doesn’t even quality as a flat base because it is too deep for it.
Second, more often than not when I see stocks run ahead of earnings, especially after they’ve already had a nice move like this (QLYS has doubled over the last 6 months) it typically isn’t a good sign. I’ve this type of move happen enough where when I see it I’m usually getting defensive in a hurry. I don’t have a sell rule around it but I do have it classified as a signal that warrants caution, analysis, and a decision to be made. Today’s move ahead of earnings was a have been taken as sell signal. So far after hours it is down over -21%.
Learn more about us at chartyourtrade.com