Page 1104 - How to Make Money in Stocks Trilogy

90 HOW TO MAKE MONEY IN STOCKS—GETTING STARTED

Expect the Unexpected

Earnings season can sometimes leave you scratching your head. A stock may
soar higher on a seemingly weak quarterly report, while another may sell off
despite posting stellar numbers. Again, that’s why your best bet is to wait for
the company to report and see how the market reacts.
Below are examples of two very different reactions to two seemingly pos-
itive earnings announcements. They’re good reminders of how you can keep
the odds of success in your favor by keeping your powder dry until you see
how the company’s earnings story plays out.

Herbalife – Q4 2010 Price
Breakout on massive volume
Daily Chart
day after earnings announced
Breakout on Good Earnings Report 80
- Herbalife posted 41% EPS growth in Q4
- Both sales and earnings accelerated
Announces earnings
after close 2/22/11 From breakout, Herbalife
rose 78% in 20 weeks
70

Huge volume spikes show
big investors jumping in
Flat base
Volume
1,200,000
700,000 © 2013 Investor’s Business Daily, Inc.
400,000
200,000
12 26 10 24 7 21 4 18 4 18 1 15
November December January February March April
Herbalife soared 78% in 20 weeks after reporting accelerating earnings growth.