Should You Exit Your Positions When Earnings Are Due?
Dave Landry is principal of Sentive Trading, a money management firm, and a
principal of Harvest Capital Management. Mr. Landry is the author of two top
selling books,
>Dave Landry’s 10 Best Swing Trader Patterns And Strategies and
>Dave Landry On Swing Trading.
If you would like a free trial to Dave’s Nightly Swing Trading Alerts Report
100% Correct System
On Monday I talked about a simple system where if the market is down, you cover existing
index shorts and buy it on the close (i.e. exit and reverse). If the market is up, you sell your
position and go short index shares. This simple system (see Monday’s column) has been
100% correct for now 7 of the 7 trades. This was put in my column to
illustrate how choppy the market has been as of late. It was NOT intended to be
an actual system. However, in spite of me saying it wasn’t a real system and and
the editor’s warning, I still received emails from people looking to debate the merits of the system. And worse, some actually wanted to make sure they had the rules straight so they could trade it by the close! Again, it was not intended to be a real system.
Hold Or Fold Before Earnings?
I’m often asked if you should hold positions through earnings. My answer is
YES! I firmly believe that surprises often happen in the direction of
trend. Let’s take a look at Abercrombie & Fitch
(
ANF |
Quote |
Chart |
News |
PowerRating), mentioned
recently in my trading service. Notice that it made a sharp thrust lower and
then pulled back. This is a pattern I call a First Thrust (email me if you need
the rules). After a slow start, the stock begins to resume its rollover. Then,
they announce earnings after Tuesday’s close. The stock gaps sharply lower
(and traded even further lower in after hours trading (a)).
Will the reaction to earnings always be in
the direction of the trend? Of course not! Nothing in trading is 100%, except of
course, my 100% system. :)
For a further explanation of trading through
earnings, additional examples of stocks mentioned recently, and my take on
current market conditions. Watch my audio/visual presentation recorded earlier
today. Email me if you need the link (or
click here).
Best of luck with your trading on
Thursday!
Dave Landry
P.S. Reminder: Protective stops on every trade!
P.P.S. Learn my newest and most advanced version of my Bow
Ties Strategy. Click
here for details.