What To Do With A Mixed Bag Of Signals

This is an interesting question that we face over and over again as traders.

When do you take that trade? When do you ignore it? A little over a week ago, Aaron's (AAN) reported an absolute blowout bottom line. Wall Street consensus estimates were looking for .27 per share, but AAN reported an actual .66 per share. Wall Street clearly was impressed as AAN spiked from a close of 10.22 on April 24th to an open of 12.25 on April 25th. That's a 20% spike on earnings results. Here's how it looks on the chart:

Enter Aarons Company Inc. (AAN):

So far so good. But let's dig a little deeper. Quarterly revenues fell short of expectations, $554 million vs. $565 million. AAN belongs to one of the worst performing industry groups over the past three months as the durable household products group ($DJUSHD) has fallen about 17-18%. But then again, AAN is a leader in the space, just last week setting a new 52-week relative high vs. its peers. What the heck do we do with all of these conflicting signals? Probably nothing. One thing's for sure, I'd keep a tight stop in the 11.75-12.00 range, IF I took a chance at all. Any signs of rolling over further and I'd want to be out of AAN.

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