How I Trade US Stock Ahead of Earnings Releases
How To Trade The News and Earning Releases In US Stock Market – Learn The Best Strategy To Buy Foreign Stocks At Low and Sell At Higher Price for Profit
As of this writing, we had just wrapped up the 3rd quarter and are at beginning the final quarter of the year.
Any moment from now, listed companies in the US equities market will be expected to release their 3rd quarter reports so that investing public can take decisions as whether to hold the stock or sell.
Earnings seasons are characterized by market noise and high volatility due to investors’ reactions to several companies reports and announcements. While some listed stocks’ prices will experience massive sell-off on disappointing results, other stocks, with the impressive report will attract positive sentiments.
The third and most confusing are stocks that would go in the opposite directions; what I mean is you will see earnings beat expectations, instead of prices to follow the same trend, it will nose-dive as profit-taking volume outweighs bidders. In such, scenario, you need to quickly understand that investors have already priced in earnings expectations before the actual releases.
In the midst of this market noise, how do you cut through the needle, capture trading opportunities ahead of other traders and exit with a sizeable profit?
Here is how I am trading Apple stocks ahead of earnings release:
Screen for Stocks With Positive or Negative Sentiments
The sentiment of a stock is the culmination of past financial results, expectations and company-specific news. It shapes investors’ emotion around the stock and overall lead to buy or sell decisions.
When investors’ sentiment is positive, the affected stock’s price tends to increase which may be a result of the last earnings report or potential growth opportunities.
Below is the chart of Apple, a stock that has been enjoying positive sentiments and had just hit $1trillion market capitalizations.
Look At Past Earnings & Analysis Forecast
Apple is expected to report its next quarterly earnings on November 1, 2018, past earnings had shown positive surprises with 11 analysts’ forecasting EPS for the next quarter at $2.77 against the reported EPS( for the same quarter last year) of $2.07.
With such positive sentiments, Apple is expected to trade higher before the earnings date as investor’s take position ahead of November announcement.
Best Entry and Exit Strategy
The overall stock trend is bullish as indicated by my favourite moving averages which I have already explained on analysis of MasterCard stock.
The best strategy to trade Apple stocks is to enter and exit before the earnings date. Why should one close one’s trade before the announcement? we still can’t rule out of the fact that the market could turn sideways if Apple’s earnings come out below expectations; to be on a safer side and lower my trade risk, I’d rather exit the market and take profit.
The trade idea is to take advantage of the positive sentiment driving the stock by waiting for a dip, on profit-taking, to the 50-day SMA support region, buy on the resumption of the uptrend and sell at a higher price per share.
On the chart shared earlier, notice how price had bounced off the 50-day SMA (the 3 big circled regions) thrice before moving up to a new level in the last 2 months.
This strategy to trading stocks ahead of earnings releases had been very profitable, at least, I made money on MasterCard, Visa Card and Amazon’s last earnings expectations using this method.