We are in the thick of earnings announcements and it is definitely a huge ingredient in what is churning this market. Trying to sort out the impact new news from major companies from the influence things like the Fed announcing it is holding pat on its policies.
While many will try to look at the recent performance of a company and use that to get a sense of where earnings will land, it can be a risky venture. Facebook is a great example. Just yesterday they announced they had great earnings but an upcoming app update for iPhones could negatively impact them in the coming months. While the company is making tons of money, this type of expectation management by the investor relations folks in the boardroom can send the stock price swinging like a loose cannon.
There are a couple options for trying to find solid wins in earnings season.
Many traders will simple avoid taking positions in companies who are due to release earnings. While this is a safe bet it can leave money on the table.
There are a number of option spread strategies to consider, from relatively safe covered calls to more bullish credit spreads. (click here for some ideas and info)
Typically, the moves related to earnings are short lived. Another strategy is to simply look at the broader context of the stock in its sector and the overall economy that may effect it. Ian Cooper uses an extremely effective approach to spotting big trades early with his unique combination of indicators and news. The best part is that he does the heavy lifting and then sends the alerts to his readers. All for just a buck. If you are looking to get fresh ideas that have turned over some lucrative trades, check it out here.
Keep learning and trade wisely,
Market Wealth Daily