New Back Test Results and How to Trade Q2 Earnings Season

Posted July 20, 2026

We recently did another back test of our #1 strategy for rapid account growth. The first 2 back tests showed great results and the most recent one was very inciteful as well.

We also are getting an early read on Q2 earnings season and earnings breakouts. What we are learning can be very useful for the bulk of earnings season which is just starting.

Earnings season is the best time for small retail swing traders and position traders to do well. So we want to get prepared now for what is coming over the next several weeks.

What is Working Now When Swing Trading

As we many of you know, our favorite stock ranking system is taught on investtobefree.com. We offer a free video course to learn how to do it yourself to get you started on the pathway to mastering the strategy.

Its been a great time to use the strategy to be sure. It tends to perform very well when small caps outperform and small caps are finally pulling it off after MANY years of small caps lagging overall.

At the halfway point, its on track for a high double digit year for 2026. One of the many great years for the 3 Stocks to Wealth system since teaching the strategy to the public in 2012 and launching the service back then.

The strategy is on a similar performance track as what we saw in the last bull market from 2009 to 2022 when it was around a 30 bagger in about 9.5 years.

What is even more exciting is that small caps could outperform for the next 5 to 10 years. This strategy could take a weaker period for the overall market indices and turn it into a stellar period.

As always, we try to follow the money. Earlier in the year the money was flowing into chips and AI hardware stocks. Over the past few weeks we are more in the top biotechs, financials and other areas of the market.

Dumping AI Hardware Stocks

One of the big reasons for the selling in AI hardware names is that fund managers have no choice. The AI and chip names moved so far, so fast that they are forced to trim those stock positions and move into any other area of the market that looks good for the next few years.

Otherwise, funds would be over weighted in one area of the market. They were hoping to trim large positions into earnings gaps but many of the top names are fading well before earnings reports. So the “dash to trim” is on now.

Short term earnings gap trades can still work for AI-related tech names but we have to take some profits in that 5% to 15% profit range and raise our stop. Some might blast off on another epic run but most will retrace fairly quickly and go into a choppy consolidation for now.

Then we wait for a bullish consolidation pattern to form to look for a good swing trading or position trading entry for a few quarters. That is, if the stocks even hold onto their long term uptrend.

AEHR and PENG had strong earnings gaps and made an initial surge higher where we took some profits and lifted our stop. Both were profitable by using the tactics taught in the free primer, but it looks like this is not the quarter where you just buy on a beat and raise quarter and just sit on a trade. At least in the AI tech related names.

What Comes Next for SpaceX Stock

In the last blog post we talked about our concern about the SPCX valuation. SPCX went from a $250 billion valuation in February to a $1.75 trillion valuation in June for the IPO. Seemed a bit of a stretch given the tactics being used to increase subscribership for Starlink.

The stock just broke below the $135 IPO price and is trending lower. Its typical for even great IPOs to pull back soon after the IPO date and come down 50%, 70% or more. Fresh IPOs tend to be very volatile and even a great technical pattern tends to have a lower win rate. Especially in a summer market until later in the August.

The exact times of year where we trade fresh IPOs is discussed in the rapid account growth videos.

Lockup expirations are looming in the months ahead and the stock is starting to pre-price the new supply that will hit the market. So the stock could be heading lower in the months ahead. Again, not unusual for a newer issue heading into lockup expirations.

If the stock has a strong bullish technical formation we will talk about in the service. If not, we just let the stock do its thing until it does. There are plenty of other stocks in strong uptrends on all timeframes reaching good technical entry points.

Again you really have to believe in the longer-term vision of the company and be prepared to wait many years for the company to achieve its goals. When swing trading top strategies, we look for ideal technical entry points where we can get a tight stop to hold while shooting for a big gain on the stock. Once the stock is down 50% from the highs, it may come back and it may not.

Get Ready for Big Earnings Breakouts (if only brief for now)

If we look past the AI hardware and chip names, things look a lot better.

TRV is a good earnings breakout pattern covered in the rapid account growth course. They had a massive earnings beat, good outlook, nice clean breakout and was a nice 1 to 2 day trade. MAN was another good one using the rapid account course videos .

So far, stocks with truly great earnings reports and outlook are working well outside of AI hardware plays. This week we get Google on Wednesday evening that has a Zacks rank of 1 as of late last week. Google does not give guidance but we could see further growth acceleration when they report after a market pullback.

So Thursday will be real interesting.

But we want to be on top of the biggest earnings smashers outside of chips and AI tech this quarter. TRV is a Dow stock which makes sense since these are generally less volatile which the market probably will like in the weeks ahead. That being said, TRV is likely to pull back in the days ahead.

Another Ideal High Tight Flag Breakout Back Test

So far this year the market has delivered over 25 ideal high tight flag breakouts that meet the rules in the rapid account growth videos.

Most breakout patterns were working poorly late last year during a long, choppy market consolidation. Average bull flag breakouts on low priced stocks were pretty terrible overall. More than usual in the lower priced area of the market.

So we focused on just the stocks in the ideal price range taught in the rapid account growth videos. Also, we avoided IPOs in a weak IPO market per the rules and also avoided stocks with multiple false breakouts as discussed in the course. We also assumed you would use extended limit orders (executed after normal market hours) as taught in the course to help nail down a big short term profit.

By focusing on just ideal high tight breakouts that meet the course rules pre market on the day of the breakout, we saw 19 winners in a row from April through mid July. Pretty incredible for a breakout pattern. These patterns tend to lead to a higher percentage of massive winners as well.

In the next boot camp we will go over the latest back test results and the key to success in the current market. We also have another excellent exit strategy based on the all of the data we have on ideal high tight flag breakouts at this point.

This new exit method has the same first profit target but is optimized for lower drawdowns and the typical move post breakout in the current market. If you want to have a great year trading with very low drawdowns, this strategy is for you.

The new method does not change the win rate or change the first percent profit target, it just helps to optimize profitability and saves even more time.

So be sure to fill out the survey below so we know how to customize the next trading boot camp for your needs and schedule in the weeks ahead.

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