Trading earnings

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hedron

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I know that a lot of traders stay away from earnings because of the high volatility and unpredictability. But I've noticed two things: (this is assuming the earnings/cc is after the close)

1) When the street thinks there are good earnings the pps share remains flat all day, and then pops the next mornings only to fall mid-day and ending the day near the opening price.

2) When the street thinks there are going to be bad earnings there is a rally into the close and then a sell off in after hours continuing into the next morning then a bounce mid-day and ending somewhere between down and flat.

Is this generally what people expect to happen? Or am I off somewhere?
 
Expect the unexpected and then don't expect the unexpected to be what you expected.

There's no good reason for any retail trader to try to play earnings before the numbers come out. Wait until the numbers come out and then trade based on what you see happening. This way it makes no difference if the news if good, bad, or perceived good or bad, or neutral. Trying to lump earnings trades into a nice neat pattern may look good on paper but actually trading it with slippage and severe volatility you will find it very gut-wrenching .

Peter
 
Unless you have fairly good idea of what the result is going to be, you will just be gambling with the earnings play. If you have found some pattern that you believe is true, I would suggest to validate it scientifically with some data. Maybe, you can collect earnings data for couple earning seasons, do some probabilistic analysis how true your observation is. Who knows, maybe you have discovered something that thousands investors have failed to see. You never know.
 
ratmpower said:
Unless you have fairly good idea of what the result is going to be, you will just be gambling with the earnings play. If you have found some pattern that you believe is true, I would suggest to validate it scientifically with some data. Maybe, you can collect earnings data for couple earning seasons, do some probabilistic analysis how true your observation is. Who knows, maybe you have discovered something that thousands investors have failed to see. You never know.
Click to expand...

Can every one please look at YUM brands chart.? Tell me what everyone sees!? I am swing trading this stock. I am long at 69.20. I mainly buy strong trending stocks on a pullback on weakness from the market as a whole. My goal is to steal 2-5% per month per month from stocks I am comfortable with.

YUM announces earnings April 18th. Strong earnings may take this stock up another 5-10%. How should I play this without missing the move. If it goes up on earnings, can I get back in without overpaying? I can probably get out at $71.20 for a nice $2.00 move, almost 3%.

HOW DO WE TRADE EARNINGS?!?
 
Lickyluciano said:
Can every one please look at YUM brands chart.? Tell me what everyone sees!? I am swing trading this stock. I am long at 69.20. I mainly buy strong trending stocks on a pullback on weakness from the market as a whole. My goal is to steal 2-5% per month per month from stocks I am comfortable with.

YUM announces earnings April 18th. Strong earnings may take this stock up another 5-10%. How should I play this without missing the move. If it goes up on earnings, can I get back in without overpaying? I can probably get out at $71.20 for a nice $2.00 move, almost 3%.

HOW DO WE TRADE EARNINGS?!?
Click to expand...

Trading stocks is not about stealing x% per month.
People have already suggested you are gambling and why would you rely on what people see on a chart on a forum to inform yourself. Madness.
 
I am not relying. I'm looking for suggestions from anyone who has experience trading earnings. I have my own ideas of course. Why Not contribute positive ideas rather than flaming?

As for whether its gambling or not depends on interpretation. Ive researched the company very well. Ultimately even with an edge, and fundamentals, there is an element of gambling. Of course.

Anyone trade earnings? Or just stay away?

http://www.huffingtonpost.com/mobileweb/2012/02/07/yum-brands-earnings_n_1259482.html
 
I never play earnings until after the numbers come out and I only look at stocks that announce after NYSE closes. Trades last ONLY a few minutes at most, then close up shop and repeat tomorrow. Holding these stocks overnight will cause insomnia, depression, night sweats, and rapid heartbeat.

There's no way you can intelligently play earnings BEFORE the data is out. The price will move based on the actual revenue AND the perceived/projected future growth that accompanies most reporting. For example if YUM brands exceeds analysts expected earnings the stock may rise, but if the projected future growth is lower then expected the stock price will turn and fall like a rock. You just can't tell ahead of time what will happen.

My 2 cents.

Peter
 
So far, market is down. YUM is up nicely and approaching 52 week highs on positive 1Q/12 earnings due out April 18th.
 
So far so good! If you are about $3.00 in profit ahead of earnings then consider taking some profits here. You can keep some shares in play and see if price will run up further, but why risk losing the entire $3.00? No need to be greedy :)

Peter
 
According to your earlier post you already made your target profit. Stick to the plan!

Peter
 
wackypete2 said:
Expect the unexpected and then don't expect the unexpected to be what you expected.

There's no good reason for any retail trader to try to play earnings before the numbers come out. Wait until the numbers come out and then trade based on what you see happening. This way it makes no difference if the news if good, bad, or perceived good or bad, or neutral. Trying to lump earnings trades into a nice neat pattern may look good on paper but actually trading it with slippage and severe volatility you will find it very gut-wrenching .

Peter
Click to expand...

Good post.

Imo this goes with any figure / market.
 
Yum announced 2011 4th Q earnings on Feb 4th, yet the stock did not take off unto Feb 15-20th where it went up $8 a share or about 12%. Interesting.
 
Last edited:
Lickyluciano said:
Are you Gentlemen strictly speaking from a day traders perspective? What about a swing trader likemyself? Isn't it the earnings that largely makes the stock move?
Click to expand...

Not sure what you mean - you can be a day trader trading swings, you cld be a positional swing trader also. So your a positional more long term swing trader then?

I don't think wackypetes comments were time frame specific. Quite a lot of things make the stock move - supply / demand is fairly key. So a company has good earnings but the pension fund which has a large stake decides to sell its holdings and move into less risky sovereign (ha) bonds - which way you reckon the price is going to go?
 
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