Fwd: 3 Earnings Season Trading Tricks

---------- Forwarded message ----------
From: Rude Awakening <rude@agorafinancial.com>
Date: Thu, Aug 21, 2014 at 7:05 AM
Subject: 3 Earnings Season Trading Tricks
To: iammejtm@gmail.com

How to beat the earnings gamblers August 21, 2014     3 Earnings Season Trading Tricks   How to beat the earnings gamblers Reactions are key Plus: Rethinking your earnings season analysis   Greg Guenthner coming to you from Baltimore, MD... Greg Guenthner We're plowing full-speed through earnings season-- that magical time each quarter when companies report their numbers to Wall Street. There's good reason why investors pay so much attention to corporate earnings. After all, positive numbers rally double-digits within a single trading session. "Heck, a well-placed trade ahead of earnings season can make a trader's year," explains our own Jonas Elmerraji. "But it's not all excitement and anticipation during earnings season. There's a flip side to that coin. That's because while good earnings can pop shares higher, bad profit numbers can smash shares dramatically lower. Quite frankly, it's a lot like navigating a minefield!" All of that said, earnings don't have to be a high-stress trading scenario for you. In fact, if you apply the right strategy, this time of the year can be very lucrative. Today, Jonas has three simple tricks that will help you take home bigger gains this earnings season. Let's get right to it... Trick 1: Don't Anticipate Earnings "The best way to avoid stepping on an earnings landmine is by not anticipating a stock's earnings in the first place," Jonas explains. "That may sound like a bit of a letdown, but let me explain why this first trick is so crucial... "You see, a lot of newer investors get confused about the difference between trading and gambling. Put simply, trading is about exploiting advantages you can wring out of the market. Gambling isn't. There's a huge difference between the two -- the biggest is the fact that under a well-formed trading strategy, you shouldn't be capable of blowing up your account. As a gambler, you're counting on random chance to make money." Ninety-nine percent of the time people bet on companies ahead of earnings, they're gambling. It's basically like buying a lottery ticket -- if you hit your numbers, you win big. Otherwise, you lose. That's why it's a terrible idea to anticipate earnings. Don't hold a short-term trade over earnings if you can help it... Trick 2: Look at Reactions "Remember, though, that I said you could actually make significant profits during earnings season," Jonas says. "So there's more to a sound earnings season strategy than just sitting on the sidelines... "Most people think that the biggest trading gains come by buying a stock ahead of earnings and then holding onto shares as they move higher. But that's just not true --as I mentioned, those are gambling gains, not trading gains. That logic is a lot like saying that the best way to strike it rich in Vegas is to hit a slot machine jackpot; I suppose it's a true statement, but good luck actually pulling it off without going broke first." A trader is not a gambler, Jonas cautions. A trader has to find an exploitable advantage. That's where reactions come into the picture. "After waiting for a firm to announce its earnings numbers, you want to pay attention to how Wall Street reacts to the numbers," he continues. "More specifically, how'd the earnings perform against Wall Street expectations, and how's Mr. Market behaving as a result? (You can find analyst estimates for most stocks by going to major financial sites like Yahoo Finance.) "A stock that beats expectations and then rallies isn't anything special. But a firm that misses earnings and either holds its ground or moves higher is a different story. That sort of unexpectedly positive reaction means that there's some exploitable strength in shares." Of course, his type of situation could provide a good opportunity to be a buyer after the numbers come out... Trick 3: Rethink Your Analysis Finally, after waiting for earnings and gauging reactions, it pays to put the puzzle together by rethinking your analysis. That means looking back to the factors that made you interested in shares and decide how the market's reaction to earnings changes your outlook. "Let's say that you're thinking about buying a stock because it just had a technical breakout," Jonas says. "But you followed my first earnings trick and waited for the numbers to come out before buying shares. Then, using trick two, you noticed that even though earnings were a miss, shares moved up a few points in the next session -- that's a very good sign. Trick three involves looking back at the technical reasons you wanted to buy shares in the first place and making sure that the bullish earnings clues still jive with the stock's setup." If they do, you've got an especially strong buy signal on your hands... Now, if you're a fundamental investor, this trick is as simple as seeing whether you'd still want to buy the company's stock after it posted those lukewarm numbers. If your core reason for buying shares isn't valid anymore, it makes sense to stay away. "Earnings can turbocharge gains on a good name, but they can't turn garbage into gold," Jonas concludes. "That's why it's essential to rethink your analysis before buying. When earnings season rolls around each quarter, that's the exact process I go through on every stock I look at..." For a limited time, Jonas has agreed to show you, step-by-step, how to go from ZERO to $10,000. Click here to join him now. [Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]     Ignore At Your Own Peril Today's Must Read Links   Underground Bank Could "Kill" Your Local ATM The Digital Crisis Nobody Warned You About... 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Jeremy Tobias Matthews