Quote from fkbsuhites:
I'm assuming he keeps on putting large discretionary trades more for the emotional rush than for the money.
I really doubt he's putting on these trades for an emotional rush. I'm guessing he's putting on these trades because he's seen certain things happen often in the past on these volatile momentum stocks and believes they're likely to happen again. GOOG beats earnings and sells off hard. BIDU did that once and made a strong comeback. ISRG beats earnings a and starts to run up. Last time they beat earnings they continued to run up significantly. Neke was probably expecting similar reactions and that's why he took the positions he did.
Here's the problem: During regular trading hours, you can get yourself out of trouble easily, but in extended hours trading you are purely gambling. There is no "market" after hours and the trading is extremely thin; it's the devil's electronic playground. The reaction to news/earnings calls occurs in pieces and a lot of the action is based on emotion and trigger-happy gambling traders.
First you get the basic earnings and revenues announcement and traders react to that (based on their opinion of what "should" happen). Then you get the details about guidance, future margins, sector headwinds/tailwinds, etc. This is the stuff that truly drives price, because this is what the institutional investors are looking at, and they move the market. So you can have an earnings beat and watch the stock sell off hard, have an earnings miss and watch price skyrocket. As a retail trader, you're left scratching your head, forming an opinion, maybe trading off your opinion instead of just listening to what the market is saying and riding along.
GOOG and ISRG both have made very strong runs and the earnings calls would have to be stellar to drive price higher. GOOG was already under pressure from its China decision. Without a hugely positive earnings call, it will likely sell off.
ISRG pretty much went parabolic last week after a year-long up trend. Without major forward guidance, it will likely sell off. Although they raised guidance, it was only by 2%, and the number of systems they sold met estimates, but in no way beat estimates. So all that big growth priced into the price run was not translated into reality.
That's why if you trade earnings in extended hours you are gambling and should expect no better results than placing your bet on red or black at the Roulette wheel.
If you want to play earnings on these high priced momentum stocks, you wait until regular trading hours and follow the price action or you buy option straddles/strangles in advance of earnings. That way you don't care if price tanks or skyrockets as long as it does one or the other and stocks like BIDU, GOOG, ISRG, PCLN, and MA nearly always make a serious move.
