Reflections of Fundamentals via Technical Patterns


Planning Ahead for Earning Season 

Often Technical Analysts will claim that technical patterns lead fundamentals. How can that be, you may wonder. Perhaps you may already have seen this in charts.

It is true that for the retail side of the market, technical patterns tend to lead fundamentals. Consequently Retail Traders can learn to see the reflections of fundamentals via technical patterns in charts. Why does this occur, should be your next question.

The reason why technical patterns tend to lead fundamentals, is the fact that fundamental information is received at different times by different Market Participant Groups. Contrary to popular retail trading myths, not every Market Participant Group receives the fundamental data at the same time.

An example of this is Earnings Reports, because the data that is provided by a company during Earnings Season is not distributed to all investors and traders at the same time. The giant Institutions buy their information, and pay a high premium for it. They have armies of analysts that visit companies regularly, doing a “walk-around” of the company facilities, talking to the CEO or CFO, talking to employees, and generally getting a hands-on view of how the company is doing weeks ahead of any Earnings Reports.

Therefore the Dark Pools aka giant Institutions, know well in advance the true condition of a company and how it is likely to report for that earnings quarter ahead of the report release.

Smaller Fund companies who are often very small franchises, must wait for the news to arrive with the reporting to the general public, which is on the day of the Earnings Report release. 

Professional Traders usually find out about the company reports well ahead of the earnings release date, especially since most work for either Buy Side or Sell Side institutions OR have access to data that is not available to the general public, Retail Traders, and Independent Investors.

Every Earnings Season, Retail Traders try to guess what is going on before a company report is released. Often times if they have exceptional skills at reading not only candlestick patterns but also indicators that track the Institutional activity, they are able to plan and prepare for the direction the stock or index will move because of the reflections of fundamentals via technical patterns.

Stock charts are a window into the world of the Professional side of the market, where paying for data before it is officially released is a standard practice. You may find this objectionable but there is nothing illegal about visiting a corporation, and talking to the CEO or CFO to determine how well their company will report. It is just costly.

With Earnings Season rapidly approaching for the 3rd quarter AND a presidential election that is high profile and extremely emotional, this quarter is going to create plenty of opportunities for the High Frequency Trading HFT to trigger, moving stocks in huge gaps or long candlesticks. 

Being prepared in advance for the Earnings Season helps Retail Traders make the right decisions, choose the best stock picks, and earn higher profits.

The chart below is an excellent example of technical patterns leading fundamentals, and showing reflections of fundamentals via technical patterns.

chart example of technical patterns leading fundamentals - technitrader

The chart clearly shows that during the long consolidation there was a steady outflow of money and selling. While the consolidation held during that period of time, indicators clearly show the selling in a slow and steady rotation pattern. 

Using indicators that are able to move contrarily reveals what is going on fundamentally well ahead of Earnings Reports.

Summary

Looking for these contrarian patterns as we come into the next Earnings Season will help you determine how the stock will behave, and how the company is likely to be reporting. Rotation is evident, while others are clearly under accumulation. 

Can stock charts show whether a stock is going to have a good report? Yes, IF the proper analysis is done with recognizing the reflections of fundamentals via technical patterns in proper indicators. Remember Price Indicators and Momentum Indicators, move AFTER price has started running. 

Using indicators that can lead price offers substantial benefits.

Sign Up to watch the TechniTrader “Stock Leading Indicators Webinar

Sign Up also gives you access to all TechniTrader "StockCharts Learning Center Webinars"

Followers of this blog may request a specific article topic by emailing: info@technitrader.com

Trade Wisely,
Martha Stokes CMT
TechniTrader technical analysis using a StockCharts chart, courtesy of StockCharts.com


Chartered Market Technician
Instructor & Developer of TechniTrader Stock and Option Courses
TechniTrader DVDS with every course.

©2016 Decisions Unlimited, Inc. dba TechniTrader.  All rights reserved. 
TechniTrader is also a registered trademark of Decisions Unlimited, Inc.

Disclaimer: All statements are the opinions of TechniTrader, its instructors and/or employees, and are not to be construed as anything more than an opinion. TechniTrader is not a broker or an investment advisor; it is strictly an educational service. There is risk in trading financial assets and derivatives. Due diligence is required for any investment. It should not be assumed that the methods or techniques presented cannot result in losses. Examples presented are for educational purposes only.