They are those little nuggets of trading knowledge the pros learned and now use to make some nice profits. There are lots of them. One that I like and has worked well in recent weeks deals with earnings.

It is simple and goes like this. If a company reports higher quarterly earnings, and they are "well above the highest estimate on the street," the stock is generally a buy. It will often rise on the day of the news and continue to trend higher for the next several weeks.

Many times, news agencies, such as Dow Jones and Reuters, will dwell on big name companies that report earnings up slightly from the consensus. However, the important thing is not to compare earnings with the consensus or so-called whisper numbers. Instead, one should compare earnings with the highest estimate on the Street.

The reason why stocks of companies with big earnings surprises do so well even "after the news is out" is because all the analysts got it wrong. They now have to revise their earnings' models. Many times, an analyst will also "upgrade" the stock.

Genesis Microchip Inc. (GNSS www.genesis-microchip.com) is a case in point. The company makes integrated circuits that receive and process digital video and graphic images. The company reported on October 19 a 190 percent surge in earnings for the fiscal second quarter ended September 30.

They posted net of 29 cents a share, up from 10 cents a year ago. That topped the consensus of 19 cents and, most importantly, the highest estimate on the Street of 22 cents a share. The gain in net reflected a 140 percent jump in revenues. That was due to a rise in shipments of its products used for flat-panel monitor applications.

The day of the news, Genesis' stock gapped ahead. It closed the day up $5.80 to $39.20. Volume was the highest in months at 8.4 million shares. Uptick volume — a measure of accumulation placing emphasis on block trades on upticks — was a bullish 377,900 shares. Normally, one would not think to buy Gensis' stock on the news, believing the big move already discounted the good report. That's the trick. In many cases, the stock will surprise and move even higher.

Genesis did just that. During the next few weeks, the stock trended higher, hitting $52. The brokerage firm of Hoefer & Arnett also upgraded the Canadian stock to a buy. Storage Technology Corp. (STK www.stortek.com) was another gem. The maker of computer storage products, such as tapes and drives, said earnings for the third quarter would exceed Street estimates. The stock spurted 2 to 15 on the forecast.

Then, on October 24, Storage reported third quarter net of 17 cents a share, up 113 percent from 8 cents a year ago. The results surpassed the consensus estimate of 8 cents and the highest estimate on the Street of 9 cents by a wide margin. The stock rose that day and closed at $16.50. It went on to reach $20.50 three weeks later.

Finally, turnaround play, Hollywood Entertainment Inc. (HLYW), moved into the spotlight on October 2 when it said earnings for the third quarter will be 15 to 17 cents a share compared with two cents a year ago. That exceeded the 90-cent-a-share consensus estimate and highest forecast of 12 cents. The stock jumped from $12.20 to $14 on the day of the news. It went on to hit $16.90 a few weeks later. It continues to act well. Interestingly, Hollywood insiders were steady buyers of the stock during the six months prior to the good earnings.

eSignal subscribers should be very alert during "earnings' season" for companies with outstanding earnings that far exceed Wall Street expectations. Often, they will jump on the news and keep on jumping for several weeks, providing a good short-term return at the very least. Sometimes, the stocks can even go on to do well for several months.

Mr. Fasciocco’s articles appear on www.tickertapedigest.com and in Investor’s Business Daily newspaper. To get a free trial subscription to the Ticker Tape Digest Pro Report, which comes out daily on the web with midday updates, send an email message to own@tickertapedigest.com. Mr. Fasciocco can be reached by email at leo@tickertapedigest.com.