Earnings Plays

Quote from chuckybrown70:

agreed about the sample size.

today was an interesting day. i have logged a bunch of experiences in my month using this play, but this is the first time i experienced this

ESRX

it hit the triple play, earnings, revs, guidance, this stock is supposed to go up. in after market it was down .50 but that was not gonna shake me. looked like a fake out. almost bought more shares, but am i stayed strict and conservative. this morning it opened up. zipped up for about 2 minutes which was cool seemed like it was gonna reach 58.50 which was my exit point. then it started to reverse. no problem right? wrong. then it fell like a rock. i was checking all the news. unlike first solar, which directly reported that guidance was lower, there was no news, in addition the news that kept crossing the wire was positive. checked the analyst downgrades, but no news. i could not figure why this went down. if you look at the chart it was clearly in a mild upward trend and was not overbought.

this was my first frustrating trade. it reached support, broke through that easily and i had to sell at a loss.

what a joke. anyone have any insight in why this stock got crushed? if these unexplainable selloffs occur it will blow up this whole strategy because there will be no predictability or pattern. i am a bit shook up.
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A couple of observations:

1) While beating estimates, revenue slightly declined from last year.
2) The company reiterated guidance @ $3.63 to $3.73 while analysts expect $3.67. This leaves a $0.04 chance earnings will not meet analyst expectations.

Overall the company met analyst expectations, not beat them. Perhaps investors were looking for a beat and sold off when they didn't get it.

Have you listened to the conference call? Usually some good dirt in there.
 
kassz, your observation is 100% correct. i agree with what you say and your possible reasoning.

i think one thing we both can agree on is that the stock price fell. in FSLR case i understand why, it is cut and dry. but in this case it is not as clear. we can guess at it, but it is not cut and dry.

thanks for the insight, but personally i would not think that the stock would sell off over 5% especially on the nice uptrend it was embarking on. in this economic enviornment that company killed it. they met all their expectations.

now, clearly, the shareholders felt different and i was caught in the middle.
 
Quote from chuckybrown70:

kassz, your observation is 100% correct. i agree with what you say and your possible reasoning.

i think one thing we both can agree on is that the stock price fell. in FSLR case i understand why, it is cut and dry. but in this case it is not as clear. we can guess at it, but it is not cut and dry.

thanks for the insight, but personally i would not think that the stock would sell off over 5% especially on the nice uptrend it was embarking on. in this economic enviornment that company killed it. they met all their expectations.

now, clearly, the shareholders felt different and i was caught in the middle.
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I agree the sell off seems excessive. My theory is the run up before earnings occured under the assumption of a beat, and when that beat didn't happen, investors took the price down to levels it should be at for simply meeting expectations.

In any case, unfortunately you got burned on this one. In your strategy, do you consider the movement of price before earnings are reported? i.e. Company X has risen 8% before earnings, therefore even if Company X beats estimates the price will not jump?
 
kassz, again i agree, but only to an extent. what i have found is that the past price movement has little relation to the earnings price jump. i.e.

ibm
spwra
wmt


to name a few. they all went down leading up to the announcement. also

myl

is an example of going up and when the earnings hit a "triple play" the stock does go up with a strong move still.

a matter of fact, what i have found is that i need to purchase the stock at the end of the day. in general, and, this is very in general, i have noticed the stock usually sells off an hour or so before end of day on an earnings day. i guess this is because a lot of day traders do not want to deal with that type of play. it saves me a ton of money (hundreds of dollars grabbing it at the very end of the day)

one thing i look at when choosing the play is that the stock is not overbought, because as you have said, if it does miss, the disappointment could cause a major price move.

in general, if you look at a chart you can guess what the move will be. usually goes up one level, maybe two.

i was actually in BWLD. but i sold at 25. missed the extra $7.

my plays today were

ATHN
DECK
SNDA
RSG
ENDP

lets see how they work out
 
It's important to realize that one miss will potentially wipe your aggregate profits. They sell off at the end of the day prior to earnings for a reason.

Previous poster mentioned management outlook/guidance, which has more weight than anything as far as the market is concerned. Placing a bet on how management will handle guidance is often just that.
 
Quote from Kassz007:

I have often wondered if there is a way to game earnings announcements without simply guessing if the company will make it's numbers or not. If anyone has a strategy for this I would be very interested in hearing it.
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yes. plant a cheap bomb. when stock passes through it, the bomb explodes, and you will be happy to collect your treasure.

PM me to get the cheap...
 
Quote from chuckybrown70:

ok, i am totally new here. i have posted some questions in another thread, hopefully some of u will take time to help answer, but now i am here to contribute.

1st let me give u some background: i am 38 have an accounting degree, played poker for 6 years, plenty of business experience, been following the stock market since 14yrs old when it was like 1000 (i think). inherited 114k. started day trading on dec 10th 2008. bought a 100k portfolio on Jan 2nd consisting of

T, SPWRA, WFC, WMT, IBM, CSCO, CAT, JNJ, K, and COP.

would be down over 20% if i would have held. but luckily sold.

in the meantime, i saw the biggest moves happening on earnings report days. so i look at the calendar. see what stocks are estimated to beat last quarters earnings, research if they usually report better than estimates (min 10 of 12 periods) make sure the stock is not over bought. look at the website to get any additional insight on earnings. make sure the analysts are not all rating avoid, then buy the stock on market close. if it hits a triple play, which is earnings, reyenue, guidance it is good for a 8% to 20% move. if it hits 2 of the 3 it will break even and if it misses on 2 i try to sell immediately at all costs. in 3 weeks i am up $5600.

does anyone else have experience with this type of play?? if so please send info, also if anyone wants more info i would be happy to supply.

ENJOY
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too much labor and opinion in what you do. you get paid not for how much work but how many times you are right. not the same thing. what makes you think that the other people are not doing what you are doing?
 
A couple other things to consider:

1. The call itself... this usually comes after the announcement. Even if it's a "triple play" in the announcement, the officers can often say something in the call that can drive the stock the other way. So, if you're holding it thru the call, you want to listen in or at least monitor price action in the stock while the call is going on.

2. Earnings whispers... these are numbers that are supposedly floating around the street by people "in the know". Even if it beats the analyst number, if the "whisper number" is higher and it didn't meet that, the stock may dive.
 
Quote from chuckybrown70:

ok, i am totally new here. i have posted some questions in another thread, hopefully some of u will take time to help answer, but now i am here to contribute.

1st let me give u some background: i am 38 have an accounting degree, played poker for 6 years, plenty of business experience, been following the stock market since 14yrs old when it was like 1000 (i think). inherited 114k. started day trading on dec 10th 2008. bought a 100k portfolio on Jan 2nd consisting of

T, SPWRA, WFC, WMT, IBM, CSCO, CAT, JNJ, K, and COP.

would be down over 20% if i would have held. but luckily sold.

in the meantime, i saw the biggest moves happening on earnings report days. so i look at the calendar. see what stocks are estimated to beat last quarters earnings, research if they usually report better than estimates (min 10 of 12 periods) make sure the stock is not over bought. look at the website to get any additional insight on earnings. make sure the analysts are not all rating avoid, then buy the stock on market close. if it hits a triple play, which is earnings, reyenue, guidance it is good for a 8% to 20% move. if it hits 2 of the 3 it will break even and if it misses on 2 i try to sell immediately at all costs. in 3 weeks i am up $5600.

does anyone else have experience with this type of play?? if so please send info, also if anyone wants more info i would be happy to supply.

ENJOY
More...

All the below is absolutely nothing more than just my opinion.

Above all, news is news is news - - - - good or bad, it's still just news.

1st: If you continue to rely on company's hitting a triple play for you to profit from, be prepared to take some great big hits........actually, trading earnings is a high risk game regardless.

2nd: The old market axiom (and it's inverse) still holds true......."Buy the rumor, sell the news."
If price has increased a few points or more into the news, expect that the rumor was being bought, and vise versa. Plan for the news to get sold.

The closer to resistance, the higher the probability news will be sold. Inverse that thinking if price is near support prior to the news.

3rd: Assuming you are in an earnings trade for a trade, not an investment, plan to fade the news. IOW, plan to trade opposite of the initial reaction to the news - give it a few minutes or more for best entry.

4th: Maybe this should be #1, but you should always consider what the overall market's reaction has been with recent news. . . . . . . . has news (good or bad) been bought - or sold? Be biased the same way as recent market reaction to news, regardless of what YOUR opinion is of the actual news.


Steve
 
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