Depends upon your trading pot. US stocks can easily move 100+ ticks between regular market close and regular market opening, even on non-results days. When earnings announcements are made, stocks can move 1000+ ticks before regular traders have the chance to act. For further proof, just look at Google and Ebay following recent quarterly earnings announcements.
A trader with a large trading pot can probably afford to take that kind of risk, although it is literally still a gamble. A company can still earn bucket loads of money but if it doesn't meet broker expectations, it can plummet overnight. Your average trader does not have the resources to second guess what is going to happen. I've found that you can still make money by waiting for the action following the news to settle and then following the trend. For most average investors, I honestly believe that this is your best way of making money.
It's not just company announcements that can cause big gaps, there are other things like broker upgrades/downgrades, contracts won/lost, FDA rulings for drug companies, share splits, takeovers, it's a minefield!
Further, you have to look at what rivals are doing. Many times a share has, say v bad results and falls, other shares in its sector fall "in sympathy" to use the jargon.
Not trying to scare you, but all these things do happen
The Beyonder is absolutely right in what s/he says. However, anticipating the items that s/he mentioned is well nigh impossible without insider information. Thus, it's a case of trying to reduce the risk to your capital as much as possible. As I stated, by closing trades before earnings announcements are made, you are at least controlling some of the risk. For short term trading, I generally rely on "trend following" strategies and manage risk with basic technical analysis (supports/resistance, volume). The problem with fundamentals for short-term trading is that the important information only trickles through to the average investor long after the big money mangers learn about it and have bought, thus pushing the price up, often in pre-market trading. This is why your average investor often ends up buying at the top.
In terms of knowing when earnings are due, the individual company's web site should have this information under "Investor Information/Relations". Barrons and SmartMoney's web sites, both part of the Wall Street Journal Group provide future earnings dates for all listed companies. The SmartMoney site also has useful information such as companies achieving 52 week highs and lows, biggest percentage gainers/losers, volume filters, etc. You can access SmartMoney at www.smartmoney.com. I subscribe for around £4, per month, although some of the info mentioned may be available without subscribing.
Hope the above is helpful but if you have any further queries, feel free to ask.
Your rite about the minefield.I nearly went short on Hewlett Packard last night!
Nicolas, thanks for the info! As i mentioned i nearly went short last night on Hewlett
and with news today on a resignation the price shot up. How does that work i would have thought the price would have fallen.
Fiorina engineered the merger between HP and Compaq, and to get to the point, the merger has not been a success and most people blame her. So when she quit the markets saw it as a good sign, a new boss, a new beginning etc etc hence the price rise.
Funny enough I was reading an article about her in Fortune called "Why Carly's Big Bet Is Failing".
Could you give me any advice on which us stocks are more favourable to hold overnight. By that i mean less choppy like some of the software stocks and less likely to give me sleepless nights! Any pointers would be great. Am i right in thinking apple would be one of these?Advice so far has been great iv'e started checking out the companies i'm trading looking for announcements etc to try and limit the risk a little.
To be honest I don't think there's such a thing as a favourable US stock to hold overnight. There's either risky, or riskier. Even blue-chip "solid" stocks have their hiccups, HP being a good example. Merck's another example, last October it withdrew one of its core drugs because of side-effects and gapped down 25% next day (check the chart out yourself).
If I had to choose, I'd suggest NYSE stocks rather than Nasdaq ones.
I'm not sure what drawdown you're prepared to take but generally if you close out trades before earnings releases, big losses are relatively rare. As I noted earlier, you cannot predict one off announcements such as what occurred with Merck. The other thing to bear in mind is that when a big company such as Google announces results, other stocks within the sector usually follow suit, often leading to big overnight movements. Just something to be mindful of.
I generally trade from close to strong support/resistance levels, thus minimising losses and potentially gaining from the bounces that often occur in these situations, particularly from stocks that are already in an upward trend.
I can't really recommend specific stocks as most of the stocks that I trade tend to be quite volatile (e.g. Ebay, Apple, Amazon, Pixar). Starbucks may be worth a look, at the moment, as it's hovering above the psychological $50.00 level. It's been in a downward trend since December but the long-term trend is up. Apple is currently in a strong upward trend but it can be volatile so be careful. I would buy if there is a pull back to around $77.00-78.00, with a stop loss at just below $76.00 but this is only my humble opinion. Others probably have different views.
You also asked earlier about getting info on US stocks. I don't know if you have Sky or one of the other satellite providers but two really good shows to catch are "Bulls & Bears" and "Cashin' In" on the Fox Channel. They broadcast on Saturdays at 15.00 and 16.30 respectively, both GMT.
If you want to read some books with good tips on how to improve your chances in the U.S. markets, I would recommend the following:
1) High Probability Trading - Marcel Link
2) Secrets for Profiting in Bull and Bear Markets - Stan Weinstein
3) Winning on Wall Street - Stefan Zweig
4) Trend Following: How Great Traders Make Millions in Up or Down Markets - Michael Covel
Others may have different recommendations but hope that the above is helpful.
Thanks people. Cheers for that nicolas I've been looking at books over the past week or so i definately need more education. Think i'm getting there tho slowly i got into apple on mon because of news(would have been on fri but i was on the beer!)
Thanks for your help Millsy