Identifying stocks, options, or futures to trade can be a daunting task. Earnings analysis, sentiment indicators, and charting techniques may help narrow down your choices.
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 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.
In the Fit All view, you’ll see the:
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.
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).
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).
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.
for thinkMoney ®
Financial Communications Society 2016
for Ticker Tape
Content Marketing Awards 2016
Content intended for educational/informational purposes only. Not investment advice, or a recommendation of any security, strategy, or account type.
Be sure to understand all risks involved with each strategy, including commission costs, before attempting to place any trade. Clients must consider all relevant risk factors, including their own personal financial situations, before trading.
Market volatility, volume, and system availability may delay account access and trade executions.
Past performance of a security or strategy does not guarantee future results or success.
Options are not suitable for all investors as the special risks inherent to options trading may expose investors to potentially rapid and substantial losses. Options trading subject to TD Ameritrade review and approval. Please read Characteristics and Risks of Standardized Options before investing in options.
Supporting documentation for any claims, comparisons, statistics, or other technical data will be supplied upon request.
This is not an offer or solicitation in any jurisdiction where we are not authorized to do business or where such offer or solicitation would be contrary to the local laws and regulations of that jurisdiction, including, but not limited to persons residing in Australia, Canada, Hong Kong, Japan, Saudi Arabia, Singapore, UK, and the countries of the European Union.
TD Ameritrade, Inc., member FINRA/SIPC, a subsidiary of The Charles Schwab Corporation. TD Ameritrade is a trademark jointly owned by TD Ameritrade IP Company, Inc. and The Toronto-Dominion Bank. © 2021 Charles Schwab & Co. Inc. All rights reserved.