'Tis the Season

                                                         ‘Tis the Season
 
Earnings season is just around the corner and it’s pretty obvious that most companies won’t hit their mark. Some are already lowering their guidance moving forward. The big question that most traders are wondering right now is, “How will the market react?”

The market isn’t rational, as you may have seen. I’ve personally seen great earnings come out, but the stock takes a nosedive. This happens for a few reasons.

The first one is that the price of the stock has already climbed up the hill. The great earnings have already been incorporated into the stock price. These fantastic earnings were already expected; therefore, the stock doesn’t react positively. Only if the earnings came in way above the expectations would the stock most likely move up even higher.

The second reason that stocks may take a hit after a great earnings report is primarily because the market trades on future expectations. Even though this past quarter was great, expectations for next quarter aren’t great. This is why the stock may take a big hit after a great report.

I’m sure many of you have also seen a really bad report come out but the stock rallies up unexpectedly. There are two main reasons this may happen.

The first is “the worst is over”, things can only get better. Next quarter will be a much better quarter. Remember the market always trades on future expectations.

Another reason could be a short squeeze. There are so many traders that have been so bearish on this stock. They’ve put on heavy short positions, but when the stock goes up significantly after the earnings report, they have to cover their shorts. Short covering buying just adds fuel to the fire.

Please don’t analyze the earnings and make a fundamental decision on whether or not to buy or short a stock.
Let the price action tell you what to do.

3 Ways I Love to Trade Earnings Season

1. Trade stocks the day before earnings come out. I love pre-earnings momentum. Please don’t hold the stock into an earnings report. That’s gambling. This is only for Day trading.
2. Trade the stock after the earnings report. This has the most bang for the buck. Here’s a recent example of an earnings report from Thursday June 18, 2020 on $KR Kroger’s.

 
They were pretty good right?
Well, the stock didn’t like it. Look at the chart below:



Every morning in our Trading rooms, I put out a Daily Dark Pool Whisper video. I map out the highest probability day trades for you using premarket price action. I can’t resist putting an after earnings whisper out. These are my favorite trades. Take a look at the mapped out trade I posted for my traders that Thursday on $KR after earnings came out.



I was bearish below $32.20. That means we would go short below $32.20. My targets were based on pivots and moving averages that I use. As you can see all my targets were hit. The stock fell over 7% after the open.

3. The third way I may trade into earnings is using options. I have a specific options strategy that I like to do when I see massive Dark Pool prints coming in on that stock. This works best when the implied volatility is very low. I don’t do this as often as I like, but there are always a few really good gems every season.

Remember, just go with the flow, don’t read into the earnings reports unless you want to become an analyst. Analysts make the worst traders. Just trade the price action! No thinking!

I'd love to help you learn how you can take advantage of the Dark Pools and accelerate your success! To learn how you can personally work with me and my team, call 1-800-544-6044 or click here to request a time to chat with us!
 
Until next time,
Happy Trading!
Stefanie Kammerman
The Stock Whisperer