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The Best Earnings Season Trades

Earnings season is the best time to trade stocks because of the explosive moves created by the earnings reports. During this time, it is important to not only pay attention to what the numbers are, but also how the stock is reacting to the news.

When stocks report earnings, the numbers are typically a clear beat or miss. As a result, the stock will usually go higher on that beat and lower on the miss. However, sometimes a stock can have an initial move in the wrong direction, thus giving patient investors an opportunity to buy at great prices.

I want to focus in on these exceptional earnings season trade opportunities.

• What causes them
• How to spot the best of these trades
• And when to strike for optimal trading profits.

Read on below for the rest.


How it Unfolds and How You Profit

Time and again I see this scenario playing out while watching stocks react to earnings reports. A positive earnings headline will hit the wire for a quality company and the stock will be bid up after hours. This makes sense as the company beat expectations and the stock is reacting rationally to the numbers.

However, the next morning the stock sells off aggressively as High Frequency Traders (HFT) crush the stock on purpose just so they can buy at a much lower price. These speed driven traders cause mayhem as the stock heads lower, forcing otherwise long-term holders of the stock to sell in panic. The purpose behind this is to push the stock down far enough to achieve a certain technical level where they can then turn around and buy it for themselves.

This is such a devious and successful tactic on the part of these well-armed HFT players. They know that when investors see the tumbling price they will assume that something negative must have been said at the analyst conference or perhaps analysts found a hidden problem in the earnings announcement which spells trouble ahead.

If an investor is aware of what just happened, they will see a trade setup that can provide a massive buying opportunity. This setup can lead to a whopper of a rebound because you have 3 things in your favor:

1) Fundamentals- The stock has had a fresh earnings beat and the fundamental growth story is still sound. This will attract many new investors to bid up shares after the drop allowing the early entrants to be amply rewarded.

2) Value- When companies beat earnings it usually comes hand in hand with higher estimates for the future (and a Zacks Rank of 1 or 2). This improvement of the earnings outlook will also raise the fair value of the stock, all the while the HFTs have pounded shares into submission. This creates an incredibly attractive value proposition.

3) Wind in Your Sails- When HFTs beat down the stock they now have to buy it back. When nervous investors have all sold there will be no more sellers left, resulting in a quick pop to the stock. Now the HFTs are on your side and will drive the price higher to where it actually should be. As the stock bounces the investors that sold earlier will realize their mistake and get back into the stock causing even more buying pressure.

Adding it all together you can appreciate why these are some of the best trades this and every earnings season.


It's Time to Strike

You may not know how to spot these juicy trades...but I do. It comes from spending 12 years as a professional trader and seeing this pattern over and over again. So why don't you come along with me for the ride as we target some of the earnings season's most timely and lucrative trades?

This new portfolio alert service is called Zacks Counterstrike.

It detects computer-triggered downward moves by otherwise worthy stocks and then joins the HFT profit party as they rebound. Using Zacks fundamental research we will only take advantage of the best of those beaten-down stocks, and also occasionally short weak stocks that were deliberately pushed upward by HFTs so they can make money on the subsequent plunge.

And then, after these Counterstrike trades have moved our way, we will lock in gains and look for the next timely opportunity.

If this sounds interesting, I suggest you look into it right now. We can't share these time-sensitive trades with too many investors and, in just a few days, the number of Zacks members lining up for them has multiplied beyond expectations. The deadline for access has now been moved up to midnight Saturday, April 16.

I look forward to sharing our first Counterstrikes with you Monday morning. Two pushed-down stocks are ready to spring.

Get set for Zacks Counterstrike right now >>

Good Investing,

Jeremy

Jeremy Mullin is Zacks' expert on High-Frequency Trading, having studied and followed their moves for more than 12 years. He combines this special talent with keen insight of Zacks Rank fundamentals as Editor of the new portfolio service, Zacks Counterstrike.

 


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