The following is just a small excerpt from my latest Weekly Strategy Session (please click on that hyperlink for details about trying it out). which I published for members and 12631 subscribers this past Sunday.
B. STRATEGY FOR PLAYING THE LATEST NEWS HEADLINES, EARNINGS SEASON, AND MACROECONOMIC DATA; SPECIFICALLY TUESDAY’S ISM MANUFACTURING INDEX, THURSDAY’S INTERNATIONAL TRADE AND JOBLESS CLAIMS, AND FRIDAY’S NONFARM PAYROLLS NUMBER.
[Please click here to see the full earnings slate of which firms report and when. Please also click here to see the full economic calendar for the week ahead (you might need to click ahead to Monday, September 1st)].
***PLEASE ALSO NOTE THAT ALL U.S. MARKETS WILL BE CLOSED FOR THE FULL SESSION THIS MONDAY IN HONOR OF THE LABOR DAY HOLIDAY***
Moving our way through the latter part of earnings season, keep in mind there are plenty of different styles that can be profitable in the market as a trader. My discipline is to usually not hold trades through earnings reports. If you do want to hold a position through the firm’s earnings report, I would suggest that you consider lightening up the position a bit before the announcement in order to mitigate the known unknowns/risks you are assuming.
Either way, I urge you to check and then double-check your current portfolio holdings to see when the firms you own are scheduled to announce earnings. As a swing trader, I am almost always looking to significantly reduce or outright close a position into earnings. There are simply too many external variables, particular to the firm in question, from an earnings report for me to have an edge. As an example, even if you do possess some type of insider or unique information about a given firm’s impending earnings report, there is still no way to know how the market will react. Stocks can just as easily sell-off on great earnings as they can on horrific ones, and vice-versa.
With that in mind, I want to point out one crucial difference between specific earnings reports relevant to the stocks of firms you own versus politics, a broad economic report, and monetary policy decisions. In trending markets, up or down, the macroeconomic data (not microeconomic, such as earnings reports) tend to be interpreted by the market in favor of the prevailing trend, even if the numbers wildly miss or easily crush expectations.
In sum, macro reports should not be treated as the sole reason to exit a stock, whereas a specific firm that you own reporting earnings most certainly can. Moreover, the reaction to the initial reaction in terms of the price action by the market after a given data point or earnings report is what matters most to swing traders.
Technical analysis has its clear limitations in that it can usually only analyze that which is currently known and legally knowable by the markets. To presume that charts can dictate everything into the future is pure folly. Trading, for all intents and purposes, is gambling, as we are wagering on outcomes yet to be determined. Instead of running away from that fact, a better approach is to embrace sound risk management principles and become astute speculators.
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