How to trade earnings reports?

[easyguru]

Quote from dsq:

not to be argumentative but CSCO last quarter bombed after great quarters of growth and ORCL did the same earnings report implosion last year after steady quarters of growth.
I mention these 2 stocks because they are among the most widely followed and traded stocks.They also point out that bad news or growth slowdown can happen without warning and you will only find out this news at earnings time.Sure you can make a ton off earnings if you can predict the future but otherwise it can be an expensive and not a prudent investment strategy.

Even more chilling example is CROX...This is the hi growth fad company that was going gangbusters all teh way up to their earnings report in oct or whatever.... surprise:bad report, and the stock got chopped in half in 2 days...from 75 to 40...

1 Earnings effect is most pronounced in stocks not widely followed by analyst. Widely followed stocks are traded using pre earnings drift method.
2 To trade earnings first and foremost one must understand what is earnings cycle, what causes earnings cycle and where is the stock currently in its earnings cycle. Earnings acceleration and surprises early in the cycle lead to rallies. Later in the cycle everybody knows about it and then the market starts anticipating slowdown in earnings. That is the reason CROX dropped post earnings.
3 CSCO had only 8% earnings surprise. That is not a significant surprise.
4 ORCL when it imploded last had a -5% surprise (a negative surprise).


One does not need to predict the future to trade earnings, one needs to understand how earnings play a role in stock price cycle. One need to understand how institutions and large funds view earnings and how it affects their buy and sell decisions.The only thing that matters to them is earnings and future earnings potential. To understand that search on Google for Earnings expectations and Cinderella Strategy


Trading earnings based strategies is what some of the most successful traders on the street do. It is not a secret. How to do it is also not a secret. There are many variations of earnings based strategies. Most of them are in public domain. In fact individual investors and small speculators have a bigger edge trading earnings than large speculators. Because size offers you flexibility to get in and out quickly.

Earnings information is freely available. Analyst earnings estimates are freely available. Company earnings guidance is freely available. Earnings strategies work on long time frames, so it is not critical to get information instantaneously. Earnings effect shows itself over many quarter, so you have enough time to act on the information.

Anyone who puts in time and effort to understand earnings and how it affects individual stocks and how aggregate earnings affect the overall stock market will never scare people with advise like stay away from earnings or it is risky to trade earnings.

 

[easyguru]

Quote from thatSAMazing:

CSCO bombed last quarter because they didn't up their guidance which is what the market was expecting. They then went on to blame the state of the economy in the conference call which sent all tech tumbling.

Please though, lets try to keep this thread on topic. This is not about whether trading earnings is good or bad. It is about how to best go about doing it. Does anyone know the first place that quarterly earnings are sent? Is it the website? Where do newswires get the numbers that they report and is it possible to go there directly.

Companies submit it to a PR distribution service like
PR Newswire
Business Wire
PR Web
Marketwire
This is where it is first sent.
These companies are wholesale distributors of press releases. They in turn send it to other media outlets.

Companies also simultaneously post it in HTML format to their web site.

 

[thatSAMazing]

Thanks again easyguru. Looks like I now just need the fastest newswire I can get. I heard someone say that Reuters was the fastest when it comes to equities. Faster than Bloomberg actually. Is that accurate? Is going with someone like PRnewswire going to get me the same speed for less money? What's considered the smartest choice when it comes to picking a newswire for equities (besides bloomberg)?

PS - I'm currently wondering if I should just ask easyguru these questions in a pm. Wouldn't want the rest of you to lose your amazing "edge."

 

[razor99]

if you hold into earnings,yoyu have absolutely no control if something goes wrong.

 

[steve46]

I think you have found your preferred way to trade earnings. I am happy for you..

Good Luck in the markets.

 

[Logged Out]

Quote from easyguru:

1 Earnings effect is most pronounced in stocks not widely followed by analyst. Widely followed stocks are traded using pre earnings drift method.
2 To trade earnings first and foremost one must understand what is earnings cycle, what causes earnings cycle and where is the stock currently in its earnings cycle. Earnings acceleration and surprises early in the cycle lead to rallies. Later in the cycle everybody knows about it and then the market starts anticipating slowdown in earnings. That is the reason CROX dropped post earnings.
3 CSCO had only 8% earnings surprise. That is not a significant surprise.
4 ORCL when it imploded last had a -5% surprise (a negative surprise).


One does not need to predict the future to trade earnings, one needs to understand how earnings play a role in stock price cycle. One need to understand how institutions and large funds view earnings and how it affects their buy and sell decisions.The only thing that matters to them is earnings and future earnings potential. To understand that search on Google for Earnings expectations and Cinderella Strategy


Trading earnings based strategies is what some of the most successful traders on the street do. It is not a secret. How to do it is also not a secret. There are many variations of earnings based strategies. Most of them are in public domain. In fact individual investors and small speculators have a bigger edge trading earnings than large speculators. Because size offers you flexibility to get in and out quickly.

Earnings information is freely available. Analyst earnings estimates are freely available. Company earnings guidance is freely available. Earnings strategies work on long time frames, so it is not critical to get information instantaneously. Earnings effect shows itself over many quarter, so you have enough time to act on the information.

Anyone who puts in time and effort to understand earnings and how it affects individual stocks and how aggregate earnings affect the overall stock market will never scare people with advise like stay away from earnings or it is risky to trade earnings.

Excellent post

 

[og5]

Keep it simple. Here is a system that always buys reports a few days after they are released (always long side, always waiting to let the market correct). Then they sell about a month before the next report. Longer timeframe but profitable regardless.

http://www.earningstrader.com/