If a stock gaps up to new highs after a strong earnings report, that can be a great buy signal. Due to an anomaly called “Post-Earnings-Announcement Drift” (PEAD), a stock that has gapped up like this will have a tendency to continue moving in the same direction for many days or even weeks. As a small investor, you can ride the wave, as larger institutional investors add to their positions over time and thus cause the stock to drift higher.
