TAKE ON THE MARKET - marketsmith.investors.com

1 take ON THE MARKETStay up-to-date on current MARKET trends with our take ON THE MARKET webinar series. Every Friday, our senior product coaches deliver insight, tips and guidance for investors looking for an edge. Alongside the timely MARKET analysis, you ll find evergreen strategies for improving your returns and outperforming the t miss this weekly video. The MARKET never stops, and neither does MarketSmith .View at: guide // 2018 Q1In this edition of the MarketSmith stock guide , we ll look to the year ahead with an eye on earnings.

2 Earnings reports can result in wild swings in a stock s price for better or worse. Smart investors can benefit from the skittish being shaken out of a top stock because of a lack of conviction. The keys are doing your homework on the company, knowing what to expect from the earnings reports and making sure you have a profit buffer to minimize risk. This quarter, we have a customer success story (and good stock-picking insight) from Steve Swetz, a full-time investor who first got started by reading Bill O Neil s book How to Make Money in Stocks.

3 Recently, Steve bought into Warrior Met Coal right before a big breakout and extended run thanks to a custom MarketSmith screen that looks for newer IPOs with strong fundamentals. He shares this screen, as well as some advice about how to become a better investor by joining a meetup group. In the Coaches Corner, we introduce Scott St. Clair, a MarketSmith coach, webinar host and featured speaker at many IBD Trading Summits. A former stockbroker, Scott is now sharing his years of firsthand MARKET experience and knowledge with MarketSmith members every day.

4 He ll share some important lessons and tips he s learned along the way, including a surprising tip from Scott O Neil that changed the way he holds his top-performing stocks in a correction. As always, if you have any questions or comments about your investing research or any MarketSmith features, please call one of our product coaches at (800) 831-2525 or email us at We re here to help you make more money in the MARKET . Best Returns, The MarketSmith Team // 2018 Q1 l MARKET ChartsS & P 500 INDEXCLOSE DAY MOVING AVERAGE200 DAY MOVING AVERAGE225023002350240024502500255026002 6502700 DAILY VOLUME AND 50-DAY AVERAGE DAILY VOLUME 2017 NASDAQ COMPOSITECLOSE DAY MOVING AVERAGE200 DAY MOVING AVERAGE535054505550565057505850595060506 150625063506450655066506750685069507050 DAILY VOLUME AND 50-DAY AVERAGE DAILY VOLUME 2017S&P 500 IndexNASDAQ

5 Composite3*All screen results are computer-generated and were run on December 29, Charts ..2 Feature Article: Earnings Reward the Best and Shake out the Rest ..4 Strong Earnings Reporters* ..6 Constellation Brands A (STZ) ..7 K B Home (KBH)..7 Global Payments Inc (GPN) ..8 Synnex Corp (SNX) ..8 Neogen Corp (NEOG) ..9 Walgreens Boots Alliance (WBA) ..9 Customer Success Story: Steve Swetz ..10 Dynamic Newer Stocks* ..12 Alibaba Group Hldg Ads (BABA) ..13 Canada Goose Hldgs Cl A (GOOS) ..13 Floor & Decor Hldgs Cl A (FND).

6 14 Gardner Denver Holdings (GDI) ..14 Daqo New Energy Corp Ads (DQ) ..15 China Lodging Group Ads (HTHT) ..15 MarketSmith Coaches Corner: Scott St. Clair ..16RS Line at New High* ..18 Ampio Pharmaceuticals (AMPE) ..19 Anaptysbio Inc (ANAB) ..19 Argenx SE Ads (ARGX) ..20 Daqo New Energy Corp Ads (DQ) ..20 Immunomedics Inc (IMMU) ..21 Neptune Tech & Bioresrc (NEPT) ..21 MarketSmith Features Highlight: Earnings ..22 Resources ..24 Connect with Us ..25 Table of // 2018 Q1 l Feature ArticleFeature Article: Earnings Reward the Best and Shake out the RestEarnings reports can be a true test of an investor : do you hold a stock despite the risk of a quick fall in price due to a bad report?

7 How much do you believe in the stock and could it fulfill its potential and gap up in a big way? The potential risks and rewards are heightened when dealing with earnings, but as always, you can use your investing knowledge (and MarketSmith ) to adjust the odds in your Money Manager David Ryan recently spoke about earnings in a webinar for MarketSmith. He noted that many investors get rattled when earnings reports are due and will back out of a perfectly good position because of the possibility of a surprise. However, a smart investor who s done the homework on a stock s fundamentals and has conviction in the company will stand to profit handsomely from a gap up and/or an extended : MarketSmith, Inc 2018 Darden Restaurants (DRI) 5 The quintessential breakout is the breakaway gap: when an event (very commonly earnings-related) sends a stock catapulting out of a proper base.

8 It s not unusual to see a top-quality stock rise at least 20% in a single day. Moreover, it leaves little doubt that the stock is heading higher and setting up for massive gains. It s a behavior seen in many of the biggest winning stocks, and one you re likely to miss out on if you avoid holding through s not to say that every stock should be held some stocks will gap down on disappointing earnings and hurt your bottom line. Knowing the difference between a true leading stock with rock-solid fundamentals and a laggard will help you find the best stocks to hold through earnings.

9 Generally speaking, holding a stock into earnings with an existing 10% profit on your position gives a good cushion. However, if a stock is extended, in a later-stage base (use Pattern Recognition) or high in volatility, the 10% rule may not apply your gains are more vulnerable to being wiped out. In this case, consider reducing your position by 50% or more. Avoid the potential downside when a company reports quarterly earnings by following a few rules. take profits at 20-25% (the blue box on MarketSmith charts), since extended stocks have a lot to lose and much less to gain.

10 Avoid flawed bases and wait for proper bases to form; that way, you avoid stocks that fizzle quickly on earnings reports. Beware of potential Earnings Per Share (EPS) deceleration, since it signals that another quarter of solid growth may not be forthcoming. If you follow a few elemental rules and approach earnings reports with conviction, you re much more likely to stick with top stocks on their runs rather than miss out on what could have Candidates for an Earnings Price BoostThis screen selects stocks from the Upcoming Earnings Report list and filters out anything with an EPS rating less than 80.