Earnings Trade Analyzer - Scoring Methodology
Overview
The Earnings Trade Analyzer uses a 5-factor weighted scoring system to evaluate post-earnings stock setups. Each stock receives a composite score (0-100) and a letter grade (A/B/C/D).
5-Factor Scoring System
Factor 1: Gap Size (25% Weight)
Measures the magnitude of the earnings gap, regardless of direction. Larger gaps indicate stronger institutional conviction.
| Absolute Gap | Score |
|---|---|
| >= 10% | 100 |
| >= 7% | 85 |
| >= 5% | 70 |
| >= 3% | 55 |
| >= 1% | 35 |
| < 1% | 15 |
Timing Logic:
- BMO (Before Market Open): gap = open[earnings_date] / close[previous_day] - 1
- AMC (After Market Close): gap = open[next_day] / close[earnings_date] - 1
- Unknown: Uses AMC logic as default
Factor 2: Pre-Earnings Trend (30% Weight)
Measures the 20-day price return leading into earnings. Stocks trending up before a positive earnings gap show stronger momentum characteristics.
| 20-Day Return | Score |
|---|---|
| >= 15% | 100 |
| >= 10% | 85 |
| >= 5% | 70 |
| >= 0% | 50 |
| >= -5% | 30 |
| < -5% | 15 |
Factor 3: Volume Trend (20% Weight)
Ratio of 20-day average volume to 60-day average volume around the earnings date. Higher ratios indicate increased institutional interest and accumulation.
| Volume Ratio (20d/60d) | Score |
|---|---|
| >= 2.0x | 100 |
| >= 1.5x | 80 |
| >= 1.2x | 60 |
| >= 1.0x | 40 |
| < 1.0x | 20 |
Factor 4: MA200 Position (15% Weight)
Current price position relative to the 200-day Simple Moving Average. Stocks above their 200-day SMA are in long-term uptrends.
| Distance from MA200 | Score |
|---|---|
| >= 20% | 100 |
| >= 10% | 85 |
| >= 5% | 70 |
| >= 0% | 55 |
| >= -5% | 35 |
| < -5% | 15 |
Factor 5: MA50 Position (10% Weight)
Current price position relative to the 50-day Simple Moving Average. Stocks above their 50-day SMA show medium-term strength.
| Distance from MA50 | Score |
|---|---|
| >= 10% | 100 |
| >= 5% | 80 |
| >= 0% | 60 |
| >= -5% | 35 |
| < -5% | 15 |
Grade Thresholds
| Grade | Score Range | Description |
|---|---|---|
| A | 85-100 | Strong earnings reaction with institutional accumulation |
| B | 70-84 | Good earnings reaction worth monitoring |
| C | 55-69 | Mixed signals, use caution |
| D | 0-54 | Weak setup, avoid |
Entry Quality Filter
When --apply-entry-filter is enabled, the following stocks are excluded:
- Stocks with current price < $10 (penny stock territory, lower institutional interest)
Historical Win Rate Context
The scoring system is designed to identify stocks with the highest probability of continued post-earnings momentum. Key observations:
- Grade A stocks (85+) historically show the strongest post-earnings drift (PEAD)
- Pre-earnings trend receives the highest weight (30%) because momentum heading into earnings is the strongest predictor of post-earnings continuation
- Volume confirmation (20%) validates institutional participation in the earnings move
- Moving average positions (25% combined) confirm the stock is in a favorable trend structure
Composite Score Formula
composite_score = (gap_score * 0.25) + (trend_score * 0.30) + (volume_score * 0.20)
+ (ma200_score * 0.15) + (ma50_score * 0.10)The weights sum to exactly 1.0 (100%).