Here’s some tips for trading around Earnings Season.. $GOOGL $MSFT – April 27, 2021


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This is Scott with your Chart of the Day. Normally with the Chart of the Day I like to give you a setup, like here’s what I am looking at, here’s what I am looking for. But really this video is kind of a public service announcement, just for you to be able to protect yourself as we get into earnings season.

Earnings can really kind of be a crapshoot, it’s a roll of the dice, you never know what’s going to happen. Even on a positive earnings announcement a stock can roll over on you. So there are a couple of things that I want to pass along to you, and hopefully, they are helpful, about how I like to deal with earnings.

(1) I don’t like to hold stocks over earnings unless I have a good cushion. A good cushion for me is at least 10 percent in terms of wiggle room. That way if a stock does gap down ideally it’s not going to gap down 10 percent.

Sometimes I also like to look up the implied move on a stock, which you can do through the options and see what the options market thinks. A stock could move in either direction and if my cushion is less than that implied move typically I will sell down to a low amount where I am okay either way. I like to have a good cushion and even if I do have a good cushion I still like to sell some before earnings.

Here on Google ( NASDAQ: GOOGL ); I had a position in Google ( NASDAQ: GOOGL ) that I bought coming off of this 50-day moving average. I did sell some Google ( NASDAQ: GOOGL ) today before the close, during the day actually. You can see here the first hour of the day was quite weak, it was a big sell-off on high volume, and so I ended up selling some Google ( NASDAQ: GOOGL ) that next hour.

I know what you are thinking, well now Google ( NASDAQ: GOOGL ) is up here. Don’t you feel dumb? The thing is, no I don’t because I don’t know what’s going to happen. We look at a success story like Google ( NASDAQ: GOOGL ) and say, wow, you should always hold over earnings.

Then you can look at something like Microsoft ( NASDAQ: MSFT ) and say, ugh, glad I didn’t hold that over earnings. So really I just want to implore you to make sure you know the dates that your stocks have earnings on, and you make sure you have a good cushion going into the earnings report because even if they are good a stock can do something like this.

It’s always about managing that risk as opposed to rolling the dice and hoping it works out. Because rolling the dice and hoping it works out is not a repeatable strategy. You really do need a strategy going into earnings. Something that you can do over and over like a process; like I always sell some before earnings, and that way I guarantee profits no matter what. Then you are glad if you held some but you are also glad if you sold some and it goes the other way on you.

So remember those dates, have a process, and think risk management first; 3 tips for earnings and I hope that helps.

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