thinkTank: Finding Movers and Shakers with Sentiment, Earnings Analysis, Charts

Deciding what to trade can be one of the most challenging aspects of trading. How do you find stocks with the greatest momentum? Should you look for price reversals? How do different assets move relative to each other? Here are some tools you could use to narrow down your choices.

Earnings Analysis: Be Prepared

Earnings season is a big one—active traders live for it. That’s when stock prices can make big moves up or down. It can be a time of potential opportunity, but also a time of risk. You know when earnings will be released, but what you don’t know is what those earnings numbers will be. And that means you’ll have to prepare for the uncertainty. Here’s how you could find earnings candidates. 

Fire up the thinkorswim® platform from TD Ameritrade (live account). See figure 1.

1. Select the Analyze tab, then Earnings.
2. Enter the stock symbol of the company expected to release earnings.
3. There are three ways to view the earnings info—Fit All, Zoom, and Compare. Fit All (default) displays all the data points on your screen. Zoom displays intraday so you can zoom in on stock price and options volatility (vol). In the Compare view, you can overlay price and vol data of past quarters to compare the results.

In the Fit All view, you’ll see the:

• Market Maker Move indicator
• Price chart
• Volatility (historical and implied)
• At-the-money (ATM) straddle
• Earnings-per-share (EPS) data

Knowing how vol moved around past earnings data doesn’t mean it’ll do the same thing when future earnings are released, but you may be more informed about the direction and magnitude of the price move.

Sentiment Zone Oscillator: Level Up or Down?

Some traders consider overly bullish and bearish sentiment as indicators for potential reversals. It makes sense. You wouldn’t want to go long at the end of an uptrend or short at the end of a downtrend. The Sentiment Zone Oscillator (SZO) indicator, available on the thinkorswim platform, could help you identify overly bullish (overbought) or bearish (oversold) conditions (see figure 2).

1. Pull up a chart of a stock or index from the Charts tab.
2. Select Studies > Add Study > All Studies > SentimentZoneOscillator.
3. The indicator is displayed in the lower pane with overbought and oversold levels marked.

Comparing Charts: Power of Percentages

When trading futures, instead of looking at a chart of one contract in isolation, it may be helpful to compare it to a chart of another contract. For example, you may want to look at price movement of the broader indices, or at how crude oil (/CL) contracts are trading relative to the S&P futures (/ES). On the thinkorswim platform, you can choose to show price as a percentage, which helps make an apples-to-apples comparison of price movement between two contracts. You’ll need to enable this in the chart settings dialog box (see figure 3).

1. Select the gear icon on your charts.
2. Select Price axis > Show bubbles as percentage > OK.
3. Enter the symbol of a futures contract, in this case /ES, in the symbol box.
4. Select the Studies icon > Add study > Compare with. If you don’t see the symbol of the contract you want to add to the chart, you can create a custom symbol.

After making your selections—and it’s a good idea to make the colors of each plot different—you should see the charts displayed together on a percentage basis. This helps identify which contract is stronger or weaker relative to the other. Analyzing such relationships could be useful in making trading decisions.