No good EP in past week. So just post a study.
There are stocks move big in short time based on catalyst, a lot of them is just one time thing while some of them will trigger long time multi-weeks/quarters move. To better understand EP, Pradeep Bonde in Stockbee divided the catalyst into several category:
(1) Story Stocks: This is biggest category. Especially common when market in short team extreme bullish stage. People are exited about the story (often un-explainable story) and market condition will help pump the stock. Normally it crash very fast as well (that is why we call it Lottery Ticket). I should avoid trading those stocks.
(2) Biotech: When company develop new drugs or get positive result in trial stage or get approved by FDA. Stocks often rally strong based on the news before showing any earning data. Those stocks may work, but often the catalyst is beyond my understanding. Biotech is also more risky than the others.
(3) Turn around play (Beaten down, value, cyclical); Company comes into trouble or cyclical stock out of favor because of market cycles. Those stocks often turn around/bottom before the showing on the earning results. It need more effort to find the correct catalyst.
(4) Growth: often small companies neglect for a long time, then suddenly shows great earnings. The earning surprise is so big that often caused by some fundamental change or new technology/industry. Big earning surprise is relatively easy to understand, problem is that it is not often, single-digital picks per year or less.
Growth EP is the one I focus on, some easy understanding catalyst in turn-around play can also be considered. Biotech so far is beyond my ability and story stocks are the ones I should avoid.
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