You’ve been tracking a company for a year and generally know its ins and outs (fundamentals and the way its stock trades).
They report quarterly earnings. It is a bit worse than you thought it would be, but this is due to the industry conditions being as bad as it can possibly get.
The stock initially trades down, but starts trading back up to its pre-earnings market value.
A fairly good sign that bad news has been baked into the company and likely the risk/reward is in your favour.