Trading in Earning season
Trading in Earning season
Earning season is a time when corporations, according to the American law, are required to submit reports on their activities. Each company produces 4 quarterly reports per year; there they publish data on earnings, EPS and operating revenues of the company. It looks like a typical report of the mid-caps.
Each trader should love the Earning season. Those are month of the main earnings on the NYSE and NASDAQ. Benefits of intraday speculator in earning season are considerably increasing. Large investment funds begin to shake up their portfolios, record profits on the expected good reports, to buy depreciating stocks on the bad report, to dump stocks of companies that did not meet expectations. Inexperienced investors during this period tend to panic and feel euphoria: the stock price change on 5-6% on the record is normal. This is what allows us to earn, in most reporting shares there is always volatility; increased interest (the main problem is to determine the side) and there is no pesky HFT- robots; tape becomes much clearer, but because of the increased volume it significantly accelerates. Very often on the reports stocks easily punch levels, which were holding for months. Significant advantage of the reporting trade is the complete lack of correlation with the rest of the market.
During the peak season of the reports the number of companies that publish reports on the day can reach 100, and for the trader the question arises – how to choose out of this quantity only 5-7 shares, which he will be trading during the trading session. How to select a good reporting shares? First of all, open the reports calendar. The first thing is to look at stocks of companies that reported after the market was closed. We recommend to use briefing.com, streetinsider.com and, of course, finviz.com
Then copy the shares, insert into the Watch list and start looking. The first thing you should pay attention to – the presence of an active postmarket. If it is not there then in 90% of cases the share is not interesting. The only exceptions are very bad and very good reports. The second step is to look where the share is and which trend it has. If the trend is completely missing – skip the share (most likely it wont be interesting to any big company, because it does not move).
Then peruse on the schedule previous reports, the range that shares had, and its volume. If the distance between the maximum and minimum of the candles on the report was less than 1$, then this share is also not interesting (except for cheep shares, where you can cut back this parameter). These parameters are needed to evaluate the potential of possible movement in the paper; the volume is needed for the determination of a possible reversal (yield of a large amount – the end of the movement).