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Usually stocks respond positively to an earnings surprise. Sometimes they are up more than 10 or 20 percent and sometimes just a few percent; it all depends on the stock and more importantly on the earnings surprise number.
This screen searches for stocks that have two consecutive and positive earnings surprises. The last earnings surprise must have occurred during the last five trading days. The screen gets earnings surprise data from the following downloader: Historical Earnings Surprise, EPS and Consensus Data (You should first download and run this downloader to get EPS, Consensus and surprise data before executing this screen). The screen then uses the "ValueWhen" function to get the previous earning surprise number and verify that this number and the last earnings surprise are higher than zero. Finally, the screen looks for the last five bars of each stock, using "hhv" function, to check whether two positive and consecutive earnings surprises occurred or not.
According to a research paper "Small Trader Reactions to Consecutive Earnings Surprises", small traders show an increasing reaction after a series of positive earnings surprises. This means that stocks that are mainly traded by small traders (usually small caps) are likely to produce a bigger increase on the second and third consecutive positive earnings surprises. The study also shows that this consecutive earnings surprises pattern is weaker for larger investors and almost inexistent for the largest institutional traders.
Trading financial instruments, including foreign exchange on margin, carries a high level of risk and is not suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to invest in financial instruments or foreign exchange you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and seek advice from an independent financial advisor if you have any doubts.
