Most traders assume that a stock jumping 20% after earnings is worth chasing. But does a bigger earnings move actually lead to better returns, or a higher chance of retracement? To find out, I analyzed 56 post-earnings momentum trades, measuring follow-through and pullbacks after the first hourly earnings candle. The results revealed a surprising sweet spot that outperformed the biggest earnings winners.

---

One of the most common assumptions among momentum traders is that the biggest earnings winners will continue climbing even further.

If you think about it, it makes intuitive sense. If a stock gaps 20%, 30%, or even 40% after reporting earnings, many traders assume the momentum is simply too strong to ignore.

But is that actually true?

To answer that question, I analyzed 56 post-earnings momentum trades from my own trading statistics database. Every trade followed the same methodology, allowing me to compare how stocks performed after different-sized hourly earnings moves.

The results were surprising.

Rather than producing the strongest follow-through, the largest earnings moves actually showed the weakest average reward-to-risk characteristics.

Instead, stocks that moved roughly 5–15% during the first hourly earnings candle produced the best balance between upside potential and downside risk.

---

Quick Answer: Should You Chase Stocks Up 20% After Earnings?

Based on a sample of 56 post-earnings momentum trades, stocks that moved between approximately 5% and 15% during the first hourly earnings candle produced the strongest average follow-through while experiencing significantly smaller drawdowns than stocks that moved more than 20%.

Stocks that moved just 5–10% during the first earnings hour produced an average 5.64:1 reward-to-risk ratio—far outperforming stocks that surged more than 20%.

I also found that:

• Moderate earnings momentum outperformed extreme earnings momentum.
• Larger first-hour moves did not translate into larger average profits.
• Stocks moving more than 20% were considerably more volatile and more likely to experience deep pullbacks.

---

---

Key Statistics – Post-Earnings Momentum Data

• 56 completed post-earnings momentum trades were analyzed in PTJ’s proprietary research database.
• Stocks moving 5-10% during the first earnings hour have produced an average 12.63% maximum favorable excursion (MFE).
• The same 5-10% group experienced an average 2.24% maximum adverse excursion (MAE), resulting in the best historical 5.64:1 reward-to-risk ratio.
• Stocks moving 10-15% during the first hour generated a similar 12.72% average MFE, but with a larger 5.16% average MAE.
• Larger first-hour earnings moves historically produced worse reward-to-risk profiles, with 20%+ movers averaging just 8.48% MFE and 10.35% MAE.

---

The Biggest Finding – Stocks moving 5–10% produced a 5.64:1 reward-to-risk ratio

The data challenges one of the most common assumptions in earnings momentum trading.

While many traders focus exclusively on stocks making massive first-hour moves, those trades actually produced the weakest average reward-to-risk profile in this dataset.

Compared to stocks moving 5–10% during the first earnings hour, stocks gaining more than 20% averaged experienced a risk-to-reward ratio of only 0.82:1, as well as:

• 📉 32.9% less upside potential
• 📈 362.1% greater downside risk
• ⚠️ An 85.5% weaker reward-to-risk ratio

By comparison, stocks moving between 5% and 10% generated an average reward-to-risk profile of approximately 5.6:1, making them the strongest group in the study.

Key takeaway: Stocks that gained 5–10% during the first hourly earnings candle produced a 5.64:1 average reward-to-risk ratio, dramatically outperforming stocks that surged more than 20%, which averaged just 0.82:1.

---

Why Larger Earnings Moves Can Be Worse Trades

Although this dataset cannot prove correlation vs causation, there are several possible explanations.

---

Profit Taking

Large first-hour moves may already reflect much of the positive earnings surprise. As early buyers begin taking profits, additional upside can become increasingly difficult.

Exhausted Buying Pressure

Momentum often attracts late buyers. When a stock has already advanced 20–30% within an hour, much of the immediate buying demand may already be exhausted.

Increased Volatility

Large earnings gaps frequently produce wider price swings, making them more susceptible to sharp pullbacks before trends can continue.

---

From all this we can still say that 5-10% earnings movers are high-quality, high probability trade setups.

However, due to potential profit taking, buying exhaustion, and increased volatility, there is always a risk that even a high probability trade will go against you.

---

Examples From the PTJ Dataset

The following examples from my proprietary post-earnings momentum database illustrate how moderate first-hour earnings moves have repeatedly produced some of the strongest follow-through.

While every trade is unique, these case studies reinforce the idea that exceptional momentum doesn’t always begin with the biggest earnings gaps.

APPS

APPS gained approximately 12.7% during the first hourly earnings candle before continuing nearly 40% higher from the hourly close.

This represents one of the strongest examples of a moderate first-hour move leading to exceptional follow-through.

---

---

PENG

PENG gained 7.5% during the first hourly earnings candle, placing it squarely within the study’s strongest-performing category. Although the stock experienced a healthy pullback after the initial move, buyers stepped back in and the stock ultimately rallied another 18.8% from the hourly close—illustrating that moderate first-hour moves can still have significant upside remaining.

---

---

NTAP

NetApp (NTAP) rallied roughly 12.7% during the first earnings hour before extending another 19.8% from the hourly close. With limited downside and sustained buying pressure, it represents one of the clearest examples of the type of earnings momentum this research identified.

---

---

SWBI

SWBI gained approximately 12.5% during the first hourly earnings candle before continuing another 12.2% from the hourly close. Despite a modest pullback along the way, the stock maintained strong momentum and ultimately rewarded traders who entered after the initial earnings move.

---

---

These three examples tell a nice story together:

• PENG → 7.5% move (lower end of the sweet spot)
• SWBI → 12.5% move (middle of the sweet spot)
• NTAP → 12.7% move (upper end of the sweet spot)

That subtly reinforces our conclusion that the 5–15% hourly earnings candle range produces excellent follow-through, and very favorable risk-to-reward profiles for momentum traders.

---

What This Means For Momentum Traders

These findings suggest that traders may benefit from shifting their focus away from the most dramatic earnings reactions.

Instead of asking,

“Which stock moved the most?”

it may be more useful to ask,

“Which stock moved enough to establish momentum without exhausting it?”

Based on this dataset, that sweet spot appears to be roughly 5–15% during the first hourly earnings candle.

One recent example which you can learn about in our PENG case study, moved 7.5% in one-hour after earnings, then rallied another +18.8% throughout the next day’s session despite experiencing a pullback first.

---

Additionally, I’ve documented many other post-earnings momentum trades, including AVAV, SWBI, and CBRL, where the stock produced an initial pop of between 5-10% and then continued moving significantly higher throughout the following session.

---

An important takeaway from today’s data is: The best trades weren’t the biggest earnings movers. They were the stocks that moved enough to confirm momentum without exhausting the move.

---

Methodology

This analysis is based on a proprietary database of post-earnings momentum trades collected and maintained by Paper Trading Journal. For every trade, the following information was recorded:

• First hourly earnings candle percentage move
• Maximum Favorable Excursion (MFE)
• Maximum Adverse Excursion (MAE)
• Technical breakout structure
• Fundamental alignment
• Candle characteristics
• Follow-through behavior

Each trade was measured using the same methodology to improve consistency across the dataset.

---

Limitations

While these findings are compelling, they should be interpreted appropriately.

This study analyzes 56 trades, which is sufficient to identify meaningful patterns but still represents a relatively modest sample compared to the thousands of earnings reports released each year.

As additional earnings seasons are added to the database, these statistics will continue to evolve and become increasingly reliable.

---

Final Thoughts – The Best Post-Earnings Momentum Setups

One of the most interesting discoveries from this research is that bigger isn’t necessarily better.

The strongest post-earnings momentum opportunities weren’t the stocks making 25%, 30%, or 40% first-hour moves.

Instead, the data suggests that stocks moving roughly 5–15% during the first hourly earnings candle offered the best combination of momentum, manageable risk, and follow-through potential.

If there’s one lesson this research suggests, it’s that traders may be asking the wrong question.

Instead of chasing the biggest earnings winners, it may be more profitable to look for stocks that have moved enough to confirm strong momentum—but not so much that the move has become exhausted.

Based on this dataset, that sweet spot appears to be a first-hour earnings move of roughly 5–15%.

If you want to go deeper:

• Explore the Trading Statistics Hub to understand how different sectors behave across market cycles
• Study real setups inside the Trade Reviews section
• Learn the framework behind high-probability setups in the Post-Earnings Momentum Strategy

This is how you turn raw market data into repeatable trading edge.