How to Read Charts During Earnings Season
Earnings season is the period where the most money is made and lost on Bursa Malaysia. Within just a few weeks, hundreds of listed companies announce their quarterly performance. Share prices can surge 15% in a single day or drop 20% before you have time to react. For investors who know how to read charts, this period is full of opportunities. For those who don't, it's full of traps.
The problem is, most technical analysis guides are written for "normal" market conditions. But during earnings season, charts don't behave normally. Gaps occur almost every day. Volume spikes without warning. Breakouts that look convincing can turn into traps. Patterns that are usually reliable suddenly don't work as expected.
This article will show you how to adjust your chart reading specifically for earnings season, the 4 technical patterns that appear most frequently, how to position before and after reports are released, and common mistakes you can avoid.
What Is Earnings Season on Bursa Malaysia
Earnings season is the period when listed companies on Bursa Malaysia announce their quarterly financial results (quarterly report or QR). According to Bursa Malaysia, every listed company must submit financial reports within 2 months after the end of each quarter.
This creates 4 main earnings seasons each year:
| Financial Quarter | Quarter End | QR Submission Deadline | Busy Season |
|---|---|---|---|
| Q4 (Oct-Dec) | 31 December | 28 February | January - February |
| Q1 (Jan-Mar) | 31 March | 31 May | April - May |
| Q2 (Apr-Jun) | 30 June | 31 August | July - August |
| Q3 (Jul-Sep) | 30 September | 30 November | October - November |
Important note: Not all companies have a financial year ending in December. Companies like Nestle have a December year-end, but Petronas Dagangan ends in March. So while the main busy seasons are during the months listed above, you'll see financial reports announced almost every week throughout the year.
For technical investors, the important thing isn't the exact date of each report, but the awareness that you are in earnings season. When these months arrive, you need to adjust how you read charts. For a complete schedule of economic events and key dates throughout the year, refer to Economic Calendar for Bursa Malaysia Investors.
Why Charts Behave Differently During Earnings Season
Price charts reflect market psychology. During normal periods, price movements are driven by relatively stable buying and selling flows. But during earnings season, several things change drastically.
1. Uncertainty spikes sharply
Before financial reports are announced, investors don't know whether company results will be good or bad. This uncertainty creates a unique condition on charts: prices tend to move in a narrow range with declining volume. Many traders avoid opening new positions because they want to "wait for the results first". This condition is called the pre-earnings squeeze.
2. Price reactions are immediate
When reports are announced, reactions happen within minutes. According to Investopedia, the majority of price movements after earnings occur in the first trading session after the announcement. This means you don't have time to "think at length". Charts move too fast for conventional analysis.
3. Gaps become extremely frequent
Because most Bursa Malaysia companies announce financial results after trading hours or before the market opens, prices often open with large gaps in the next session. If you're used to reading charts without gaps, you need to adjust your reading during earnings season. To fully understand the types of gaps and their meanings, read Stock Gaps: 4 Types of Gaps and What Each One Signals.
4. Volume changes character
During earnings season, volume patterns change radically. Volume may be very low before the announcement (investors waiting), then spike 5 to 10 times on announcement day. This volume surge is different from a typical volume spike because it's driven by new information, not pure speculation. A deeper understanding of volume spikes can be found in Volume Spike: 5 Hidden Signals in Stock Charts.
5. Technical indicators become less reliable
RSI, MACD, Stochastic and other momentum indicators are calculated based on historical price data. When a stock gaps 10% in a single session, these indicators become "overloaded" and give misleading readings. RSI might show oversold, but the price keeps falling. MACD might give a bullish crossover signal, but it's just chasing a gap that has already occurred.
The bottom line: during earnings season, you need to rely more on price action, volume, and context rather than the lagging indicators you normally use.
4 Technical Patterns That Frequently Appear During Earnings
Although charts move more "wildly" during earnings season, there are several patterns that repeat almost every season. Identifying these patterns gives you an edge over investors who act purely on emotion after reading news headlines.
1. Pre-Earnings Squeeze
This occurs in the 5 to 10 trading days before the QR announcement date. Price moves in an increasingly narrow range, volume declines, and Bollinger Bands start contracting. It looks like the stock is "dead" on the chart, but it's actually building energy.
Chart characteristics:
- Small-bodied candlesticks with short shadows, consecutive for several days
- Bollinger Bands tightening, Bandwidth at low levels. To understand how to use the Bollinger squeeze, refer to Bollinger Band Squeeze: How to Detect Price Explosions Before They Happen
- Volume decreasing day by day approaching the QR date
- Price hovering near key moving averages (SMA 20 or SMA 50) without clear direction
What it tells you: The market is waiting. Smart money doesn't want to commit before new information arrives. This squeeze is preparation for the big move that will happen after the QR is announced. The direction of the move depends on the report's results, not on the squeeze pattern itself.
2. Earnings Gap
An earnings gap is a large gap that occurs immediately after the announcement of financial results. It can be a gap up (results exceed expectations) or gap down (results disappoint). According to Charles Schwab, the size of the gap often depends not on the absolute profit figure, but on the difference between actual results and analyst expectations (earnings surprise).
Chart characteristics:
- A large gap (3% to 15% or more) at the opening of the session following the announcement
- Volume on the first day after the gap is typically 3 to 10 times the average
- The first candlestick after the gap is usually large with a full body (not a doji)
- The gap can occur even if the price has already been moving in the same direction
Key observation: Not all earnings gaps hold. If a gap up occurs but volume diminishes on the second and third day, there's a risk the gap will close. Conversely, if the gap is accompanied by volume that remains high for 2 to 3 days, it's more likely to become a breakaway gap that signals the start of a new trend.
3. Post-Earnings Drift
Post-earnings announcement drift (PEAD) is a phenomenon where stock prices continue moving in the same direction for several weeks after the financial announcement. According to academic research reported by Investopedia, this is one of the most consistent market anomalies and has been documented since the 1960s.
Chart characteristics:
- After the earnings gap, the price doesn't stop there but continues moving in one direction for 2 to 6 weeks
- Small pullbacks occur, but the price consistently makes higher highs (if drifting up) or lower lows (if drifting down)
- Volume remains above average even if not as high as announcement day
- The 20-day moving average acts as dynamic support during an upward drift
Why it happens: The market is slow to fully absorb information. Large institutional investors cannot buy or sell all their holdings in one day. They take weeks to adjust positions, creating sustained buying or selling pressure.
4. Earnings Trap
This is perhaps the most dangerous pattern during earnings season. An earnings trap occurs when the chart appears to give positive signals after the announcement, but actually traps late buyers.
Chart characteristics:
- The stock gaps up with high volume on announcement day, looking very bullish
- But on the same day, the price starts falling from the high and closes near the low (forming a long upper shadow or shooting star)
- On the second and third day, volume diminishes but the price continues declining
- Within a week, the entire gap is closed and the price falls below the pre-announcement level
Why it happens: There are two common scenarios. First, "buy the rumour, sell the news". Investors who bought before the QR use the good news as an opportunity to sell and take profits. Second, the financial results are indeed good, but forward guidance disappoints. Experienced investors read not only the past quarter's numbers, but also what management says about the next quarter.
How to Position Before, During and After Reports
Knowing the patterns alone isn't enough. You need a clear strategy for each phase of earnings season.
Before the Report (1-2 weeks before QR)
Gather information: Check the QR dates for companies you hold or monitor. Announcement dates are usually listed on Bursa Malaysia's website or your broker's platform. Create a short list of stocks announcing QR in the coming week.
Study the current trend: Look at the company's chart in the medium term (daily chart, 3 to 6 months). Is it in an uptrend, downtrend, or sideways? A stock that has already risen 30% heading into the QR has a higher "sell the news" risk compared to one that's still moving flat.
Reduce position size: If you already hold a stock that's about to announce its QR, consider reducing your position size by 30% to 50% before the announcement. This protects you from a large gap down while still giving you exposure if results are good.
During the Report (announcement day)
Don't chase the opening gap: This is the most common mistake. When a stock gaps up 10% at the open, many investors FOMO and buy at the highest price. But the first 30 minutes after a gap is the most volatile and most dangerous period. Wait at least 30 minutes to see how the market absorbs the gap.
Watch intraday volume: If volume remains high throughout the session and the price holds near the high, that's a sign of genuine strength. If volume drops after the opening and the price starts "drifting" downward, be cautious.
Read the closing candlestick: How the stock closes on announcement day tells you a lot. A close near the high is bullish. A close near the low despite a gap up is a warning sign (potential earnings trap).
After the Report (1-4 weeks after QR)
Monitor post-earnings drift: If the stock gaps up and the second day continues rising with healthy volume, consider entering a position on a small pullback. Place the stop loss below the gap low (gap fill level).
Don't enter too late: After 2 weeks of drift, most of the move has already happened. Entering in the third or fourth week usually offers a less attractive risk-reward ratio.
Use MA 20 as a guide: During a healthy post-earnings drift, price typically stays above the 20-day moving average. If the price closes below MA 20 after the drift has started, that's a signal the drift may have ended.
Chart Movement Examples During Earnings on Bursa
Here are examples of the types of movements that frequently occur on popular Bursa Malaysia stocks during earnings season. These patterns repeat almost every season, and you can use them as reference.
Example 1: Pre-Earnings Squeeze followed by Gap Up
Stocks like Tenaga Nasional frequently show this pattern. A week before the QR announcement, price moves sideways with decreasing volume. Bollinger Bands contract. When results are announced exceeding expectations, the stock gaps up 3% to 5% in the next session with doubled volume.
An investor who identifies the squeeze before the QR can prepare an action plan: if it gaps up with strong volume, enter on a small pullback. If it gaps down, wait and observe whether the gap closes (common gap) or continues (breakaway gap).
Example 2: Earnings Trap on Momentum Stocks
Momentum stocks like Inari Amertron or Frontken that have already risen 20% to 30% heading into the QR often experience earnings traps. The financial results are indeed good, the stock gaps up at the open, but smart money that bought earlier starts selling into that strength. The result: the stock closes near its low for the day and continues declining in the following days.
The lesson: when a stock has already risen significantly heading into the QR, good results alone aren't enough. Results need to be exceptionally good, exceeding even the most optimistic expectations, to sustain the upward momentum.
Example 3: Post-Earnings Drift on Undervalued Stocks
Less popular stocks like UchiTec or Scientex sometimes announce QR results that far exceed expectations. Because fewer analysts cover them, the market reaction is slower. The stock may gap up only 2% to 3% on the first day, but then continues rising gradually over 3 to 6 weeks (post-earnings drift).
This is the best opportunity for retail investors because you can still enter in the first week after the QR and ride the continued drift. The key: ensure volume remains above average and the price doesn't fall below MA 20.
Example 4: Gap Down and Recovery
Not all earnings gap downs are negative in the long term. Blue chip stocks like Maybank or Petronas Chemicals may gap down 3% to 5% due to one quarter of results slightly below expectations. But if long-term fundamentals remain solid, these gap downs are often closed within 2 to 4 weeks.
On the chart, you'll see a gap down followed by several days of sideways trading near the lower level, then the price starts slowly climbing back to the pre-gap level. This is an opportunity for patient buyers who can distinguish between one quarter of weak financial results and a genuine fundamental change.
Common Trader Mistakes During Earnings Season
Understanding other people's mistakes is the fastest way to improve your own trading. Here are the most common mistakes during earnings season.
1. Buying solely because "results are good"
Good financial results don't necessarily mean the price will rise. If the market has already been expecting good results (price has already risen before the QR), the good news may already be "priced in". You need to look at the chart: if the price has risen 20% in the month leading up to the QR, expectations are already high and the risk of "sell the news" is real.
2. FOMO on the opening gap
This is perhaps the most expensive mistake. When a stock gaps up 10%, FOMO emotions drive many investors to buy at the day's highest price. The problem is, you don't know whether that gap is a breakaway gap (which will continue rising) or an exhaustion gap (which will close). Wait at least one full session before making a decision.
3. Ignoring volume after the gap
Many investors only look at the gap direction (up or down) but ignore volume. A gap up with low volume is a major warning that the move may not be sustainable. Conversely, a gap down with extremely high volume may signal a selling climax, the point where sellers have exhausted their energy.
4. Holding full positions without stop loss
During earnings season, a 10% to 15% gap down can happen overnight. If you hold a full position without a stop loss or risk management plan, one bad QR can wipe out months of profits. Consider reducing position size approaching the QR or set a mental stop loss at a level you can accept.
5. Comparing only with last year's QR
Many investors only look at YoY (year-over-year) growth. But the market focuses more on QoQ (quarter-over-quarter) trends and the difference from consensus estimates. A stock with profits up 50% YoY can still fall if the analyst consensus expected a 70% increase.
6. Treating all stocks the same
Large cap stocks like CIMB react differently from small cap stocks during earnings. Large caps usually have broader analyst coverage, so market expectations are more accurate and surprises are rarer. Small caps are more likely to produce earnings surprises due to less coverage, creating larger post-earnings drift opportunities.
Frequently Asked Questions (FAQ)
When is earnings season on Bursa Malaysia?
The main earnings seasons on Bursa Malaysia occur in February, May, August, and November. These are periods when the majority of listed companies submit their quarterly reports, based on the 2-month deadline after the end of each financial quarter.
Can I rely entirely on technical analysis during earnings season?
Not entirely. During earnings season, price movements are driven by new fundamental information (financial results). Technical analysis is still useful for identifying entry and exit points, but you need to combine it with a basic understanding of company performance and market expectations.
Is it better to buy before or after the QR is announced?
For most retail investors, it's safer to buy after the QR is announced and wait 1 to 2 days to observe the market's reaction. Buying before the QR is like betting on results you don't know. Unless you have very strong fundamental conviction, the risk of buying before the QR usually isn't worth it.
Why do stocks fall even when financial results are good?
This happens because market expectations were already high. If a stock has risen 20% heading into the QR, the market has already "priced in" good results. When results are indeed good but don't exceed expectations, investors who are already in profit sell to take gains. This is called "sell the news".
How long does post-earnings drift usually last?
Based on academic research, post-earnings drift can last 2 to 8 weeks after the announcement. On Bursa Malaysia, the most noticeable drift typically occurs in the first 2 to 4 weeks after the QR, especially for stocks with a large earnings surprise.
What's the difference between an earnings gap and a regular gap?
An earnings gap occurs due to new fundamental information (financial results), while a regular gap may occur due to opening order imbalances without a clear news catalyst. Earnings gaps are usually larger in percentage terms, accompanied by much higher volume, and have a more prolonged effect on price trends.
How do you determine whether an earnings gap will hold or close?
Watch three things: volume on the second and third day after the gap (does it remain high?), candlestick formation (does the price continue rising or start falling?), and the trend context before the gap (had the stock already risen significantly before the QR?). Gaps accompanied by sustained high volume and price holding near highs are more likely to hold.
Should I sell all stocks before earnings season to avoid risk?
No. Selling all stocks means you also miss opportunities from good financial results. A smarter approach is to reduce position sizes for high-risk stocks (those that have already risen significantly or are in a weak sector) and maintain positions in stocks where you're confident in the fundamentals.
Conclusion
Earnings season isn't the time to stop reading charts. On the contrary, it's when charts tell you the most about what's happening inside the market. Pre-earnings squeeze, earnings gap, post-earnings drift, and earnings trap are patterns that repeat every season. By recognising these patterns and having a clear action plan before, during, and after announcements, you can turn earnings season uncertainty into an advantage.
The key takeaway: don't rely on news headlines or profit figures alone. Read the chart. Watch the volume. Understand the context. And most importantly, don't chase the opening gap without solid evidence.
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