It’s earnings season. This is our playoffs. Living in these uncertain times the market is volatile. Adding this fact to earnings season offers us an unusual amount of trading opportunity. This is an excellent trading market. And as an intraday trader there is a large check the market is about to write to you if you just act in your self-interest. Let’s discuss.
During earnings season our desk always starts trading too many stocks. This is not in their self-interest. We just exited a discussion about the danger of spreading yourself too thin. As an intraday trader we have some huge advantages. We must take advantage of them.
First we can be extremely selective with what we trade. We can find the stocks that are best for us. During earnings season we can find one or two stocks and watch every tick. Doing so enables us to find the stock’s true intraday levels. For example by watching every tick in POT into the Close, we can tell that the move above 82.50 was a fake breakout. So we exit and start over. As intraday traders by watching every tick we can easily determine that the move above 11 in HIG on the open was not sustainable. And we can sink our teeth into a huge short on the Open in HIG.
But if we are watching too many stocks, if we are not watching all the ticks in a few stocks, then we miss gathering this important information. When you jump into another stock in which you do not have an edge, where you have missed important ticks, you will likely just lose money. But most importantly there is a huge opportunity cost. You were not watching the ticks in a stock in play, when you jumped into that other stock. If you are jumping in PRU on the open, while you are also trying to watch HIG you would have missed the clear failure above 11. You would not have been able to load up on the short side.
During earnings season when you watch every tick in a few stocks there are numerous opportunities during the trading day to spot excellent risk/reward plays. Stocks will be temporarily mispriced which you will exploit. True intraday levels will develop where you can establish significant positions. And these positions often are easy plays that most mediocre traders could identify by just watching the order flow.
It is our playoffs but relax. Do not try too hard. Do not hope you are seeing levels develop. During earnings season the levels are clear. There are so many excellent trading opportunities that if you just wait the plays will develop. And if you focus on the stocks that are best for you these easy plays will materialize.
This is our time to pad our bank accounts. All it takes during this earnings season is to relax, wait, and pounce when clear opportunities are presented to you. The market will serve up huge meatballs right down the middle of the plate for you to crush during this earnings season. But if you try too hard, if you spread yourself too thin, then you will swing and miss at this opportunity.
Best of luck with your trading! Don’t forget to follow us on twitter.
6 Comments on “Time to Make Some Bank”
We received recently a request to produce a filter that lets a trader filter out stocks with earning announcements in less than ‘X’ days. Would something like this appeal to you and your traders as well?
We received recently a request to produce a filter that lets a trader filter out stocks with earning announcements in less than ‘X’ days. Would something like this appeal to you and your traders as well?
Bella, the hig short below 11 that you wrote about, was it based on dropping below the pre market trend line. Great sight. Thanks
Bella, the hig short below 11 that you wrote about, was it based on dropping below the pre market trend line. Great sight. Thanks
Jay, Great question. We saw 11 and 10.50 as levels in the premarket. Great to notice the 11 level. And we use those levels. There was a ton of volume done right on the open. BTW levels where the most volume is done trump lesser volume levels from the premarket. And HIG could not sustain the move above 11. It kept coming back to 11 too easily. It dipped below 11 too easily. A strong HIG on the Open would have held 11. A very strong HIG would have held above 11 when if first made a nice upmove to 11.35ish. When we saw the weakness we started our shorts. And they were started at 10.94 when HIG had trouble trading even above 11.02. I hope that helps.
David,
That would be a good tool for some traders. This would be particularly important for new traders. New traders should not trade stocks into the close that are about to report after the Close. They are too volatile.