Hey Market Pilot,
Earnings season is in full swing, and it has been a wild one. We have seen all sorts of reactions out there with very polar results like Amazon (AMZN) down hard but Atlassian Corporation (TEAM) up huge. It’s tough to know exactly which way these binary events will go, so I prefer to stay away until the dust settles.
Traders ask me how close to earnings am I willing to hold a stock, and then how soon after am I willing to get back in? If the setup is right, I will trade a stock all the way up until the day before their earnings. Sometimes we get what an old mentor of mine would call a “RUIE” which stands for a “Run Up Into Earnings.” This would be the typical “buy the rumor, sell the news” type move. This means you better be out when the earnings report is released because the market reaction will most likely drop the stock on the report.
I haven’t seen heavy drops lately. What I have seen is price will flag sideways going into the report and then move due to the report.
What about getting into trades after earnings reports? I am willing to get in almost immediately after (assuming the setup is there). In the case of the stock dropping on the earnings report, this isn’t always a bad sign. Sometimes it’s just market manipulation and it can provide a lower entry point if all other items line up. Sometimes price pops for earnings, which you can either catch and ride the momentum for a quick day trade or wait for that pop to subside and find a bit of a pullback to enter.
I am mostly just happy when earnings are out of the way because they can have such large moves which the technicals may not be helpful for determining where price will go. So I play it safer and just look for my opportunity after the event. It takes a little patience, but I have found it to be worthwhile.
Your Profit Pilot, TG
