Earnings Reactions Create Trading Opportunities

Tractor Supply Company (TSCO) has been one of the best-performing specialty retailers ($DJUSRS) of 2022.

TSCO has been trending higher on a relative basis since November 2021. While price action has been moving lower, TSCO has seen its AD line rising, especially over the past 2-3 months. Given this relative strength, I believe Wall Street has been accumulating the stock:

Enter Tractor Supply Company (TSCO):

After reporting quarterly results that showed slightly better than expected revenues and earnings, TSCO experienced a "sell on the news" kind of day on Thursday. This type of selling after a strong report (TSCO raised guidance) typically provides an excellent trading opportunity. And again, a rising AD line suggests that early morning weakness will likely be bought and that's EXACTLY what happened on Thursday. The weakness that TSCO saw was in the very early morning trading. In fact, its low of the day occurred in the first 10 minutes of trading.

What does this mean?

• I believe a stock that shows excellent relative strength, beats revenue and earnings estimates, raises guidance, and trades lower in early trading generally provides great trading setups.
• TSCO closing 6-7 bucks off its early morning low is not all that shocking, given the chart attributes.

Happy Trading! Tom Bowley Chief Market Strategist EarningsBeats.com Better Timing. Better Trades.