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Earnings releases come with both big rewards, but also elevated levels of risk. The better informed you are, the greater your chances of success. For example, having access to a simple data point such as consensus expectations goes a long way in knowing how to position beforehand or react post-earnings.
I however, do not have access to any of these data points, hence, recommending trade ideas close to or around earnings releases can lead to a binary outcome.
Since I lack the key tools and information, I would prefer to react to opportunities post-earnings as the potential volatility also offers trades for the 'quick-fingered' trader.
Below, I take a look at key levels on Truworths (TRU) in the event of an increase in volatility:
1. The share is above a rising 21-week EMA, which is a well-known support range on a pullback however, we do know that this level can be breached when corporate announcements are communicated to the market. The swing low is at 8640c-8650c, therefore this would be a first level of interest to potential re-accumulate.
2. The previous breakout level is at 8373c, and this is just above the 200-day SMA, which would also potentially be a range to re-accumulate.
3. At the recent high, TRU was featured in my commentary/table as well as highlighted via the Tactical Trading Guide where it cautioned traders not to chase, but instead wait for a pullback or look for an opportunity to short/sell. If TRU reports before the market opens, then a strategy one could also follow would be to monitor the price action during the first 30 minutes to the first hour of trading. The share could trade above the prior session low, however, any break below the prior week lows could be indicative of emerging weakness for the upcoming session. Traders could then look to possibly short/sell on a break of the weekly lows.
Recently, discussed both Spar and Shoprite as short/sell opportunities.
SPP
SHP - The share traded above 314 and subsequently fell sharply to a low of R285.41
Lester Davids
Analyst: Unum Capital
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