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Can You Profit from Trading the Earnings Season?

Four times a year there is a confluence of corporate earnings reports. It can create turbulence for the overall market as well as the individual stocks. Is there anything we can do to take advantage of this avalanche of breaking news? We have advice from several experts, and some special resources.

Trading Tips for Earnings Season

  • Fidelity Investments offers a comprehensive guide, beginning with your own earnings forecast.
  • Investopedia also has an overview of strategies.
  • Goldman Sachs shares ideas for playing the current low volatility. While the examples are from last quarter, the concept is easily updated. We looked today at the weekly options in JP Morgan (JPM). Earnings are out tomorrow morning, and the options expire in the afternoon. Today you could have bought an ATM straddle. (If you do not know what that means, you should not be trying it). It would have cost about $1.80. Based upon the last three earnings reports, you might have made money on a play like this, but you would need to be agile and accurate in trading the announcement.
  • Investor’s Business Daily
    suggests swing trading based upon technical analysis.
  • Zacks
    suggests making a directional play based upon your expectations (and their research).

These are all helpful, but overlapping tips. Organizing by strategy, we get the following:

  • Directional – stock or options.
  • Volatility – option plays.
  • Follow the initial reaction – hoping the “dumb money” is slower.

As always, I’ll share my own observations in the conclusion, along with the top resources I use.

Expert Picks from the Models

This week’s choices include several market sectors.

Holmes: This week, I picked up Anheuser- Busch InBev SA/NV (BUD), the Belgium-based brewing company. Leading into last October, the stock was inching up just above the $132-level. Then, within a one-month period from October into November, it had three huge declines down to around $102. For the next six to seven-month period, the stock has been making very small and steady attempts to pick itself up again. In May, on its recovery phase, the stock prices touched decent levels up and around $ 117.50. In June and July, the stock saw some declines in combination with short upsides. I figure that the stock has still more to gain on its recovery and as always, I buy on the dip. The 50-day average cutting above the 200-day average in a “Golden Cross” also shows more upward support for the stock price.

Jeff: I am still struggling with the “Belgium-based.” Isn’t this the company of Clydesdales and Christmas Cards?

H: Those emotional factors are not part of my analysis. Look at the chart.

J: Do you know when the earnings will be released?

H: I don’t know, and I don’t care.

J: For those who do care, reports:

Anheuser-Busch Inbev SA is expected* to report earnings on 07/27/2017 before market open. The report will be for the fiscal Quarter ending Jun 2017. According to Zacks Investment Research, based on 1 analysts’ forecasts, the consensus EPS forecast for the quarter is $1.14. The reported...