There are certain requirements placed upon publicly traded companies. One is that they disclose the prior quarters earnings to shareholders. This is called earnings season.
During earnings season the company will either post numbers that beat or miss earnings estimates. When this happens you can usually see a pop or drop in the stock. I have seen small swings like 1-2% and I have seen big ones like the 25-30% swing in Tesla years back. These swings provide opportunities to profit if you guess right.
This post will provide you with some fairly straight forward ways I gauge if a company will pop or drop after they report. 1) Look at the articles 2) look at the chart 3) go with your gut.
- Read please read
One way to have a good idea of whether a company will perform well following earnings is what the analysts are reporting. There are people who are paid very well to cover and report on publicly traded companies called analysts. These analysts work for large investment banks and are usually very educated people. Analysts will essentially do a lot of the research and work for you and will post ratings of “buy”, “hold” and “sell” on the stock.
You can find these reports and articles on google finance on the right side of the chart. There is more than enough information there. I highly recommend you read as many reports as you can get your hands on to look at the facts and credibility of their analysis and the direction they believe that the stock is heading. They are usually spot on.
2. Look at the chart
Next, you have to analyze the trends that the stock is moving in. The trend is your friend. Unless there is some shocking news that will reverse the direction of the stock you should bet on the trend. The trend lines will usually help dictate where the stock is going and where the pop will point to following earnings. So its important to look at which direction the market was already heading before earnings.
If it is heading down then a lot of the bad news was already priced into the current price and the earnings report will just solidify its poor performance causing it to fall further. If the market has good feelings about the stock the trend will already be heading up and the earnings will provide proof that it really is a great stock.
There are many other more sophisticated charts and patterns but the trend is a great indicator of future price movement.
3. Go with your gut
I always tell people that they are better investors than they think they are. You have to go with your gut. If you see packed stores, long lines and sold out products, that is a great sign that earnings will provide a pop and profit. If you see discounts and sales being offered to induce people to come into the store this is a sign that earnings will be poor. This is what we have seen with retail.
Listen to people, what do they like what do they not like. What brands are your friends using and talking about. What do you see people wearing. Pay attention and then go with what feels right. Go with your gut! Your first decision is usually the best decision.
One important thing to look at is that if people are fleeing one area they are likely doing it at the expense of another. So if retail is suffering that is an indicator that online retailers like amazon are flourishing. You have to apply some thought but if you feel like a company is a great company and you personally enjoy their products that is a good sign the market does too!
Hopefully this information is helpful. We are in the middle of earnings season and there is money to be made. If you are interested in joining a club that is taking advantage of market opportunities email us at firstname.lastname@example.org