This New Tool Could Change How You See Earnings Season

In mid-April, I was able to attend the Chartered Market Technician (CMT) Association’s Annual Symposium.

I had a great time seeing some old friends and networking with the world’s greatest traders.

Every year I learn something new. This year, perhaps the biggest tool I brought back with me was a company called Prattle, and its innovative way to look at earnings reports.

Take a look at this chart:

Prattle

You’ll notice the blue line is an adjusted close price for a stock. In this case, it’s Alexion Pharmaceuticals Inc. (Nasdaq: ALXN). But the orange line is the one I want you to focus on: It’s the sentiment indicator.

A typical sentiment reading you hear about in the news either comes from a survey, or another indicator for the stock.

But this is what is unique about Prattle.

It offers a sentiment reading that is based on an algorithm that categorizes each earnings report.

It uses machine learning to fine-tune an earnings statement to generate a sentiment reading. A reading it can then visualize, like on the chart above.

This was impressive to me, so it is a concept I’m exploring more.

In the meantime, I wanted to share it with you as well.

In the chart above, you’ll notice that since 2015, both the price and sentiment readings were drifting lower. Then late last year the sentiment reading in Alexion’s earnings report surged higher, and the stock seems to have stabilized.

This may prove to be an ideal buying opportunity. Just keep in mind, I haven’t tested a strategy like this yet — it is still in the works.

Regards,

Chad Shoop, CMT

Editor, Automatic Profits Alert