The earnings season has started and as usual might offer long or short opportunities for those focusing on earnings lead strategies. Overall the market continues to be range bound and since January/ February has essentially remained in sideway pattern with sporadic attempts at breakouts or breakdown.
There has been a steady stream of bad news and yet market has not had a washout move. If you read the news and see some of the hyper ventilation by the usual perma bears who have been predicting 50% plus drops since last 3 years plus, you would think the market would be down severely. But at this stage it is just a 20% kind of correction after a 41/2 years of rally. That still looks like a normal bear move post multi year bull move from 2003 bottom. We have extremely high probability of bullish move resumption in later half of the year. Such move is likely to be triggered by earnings trends. Ultimately market looks and often discounts next 2-3 earnings seasons.
With earnings starting to trickle in , revisiting earnings based strategies might be useful for those
If you really apply yourself , you can easily find 5 to 10 very good trades during earnings season. In a tough environment like current one you may find just 5-6 good opportunities. The beauty of earnings trade is it gives you anywhere between 20 to 100% plus returns in few months or sometime days post entry. This is one method if you master, it gives you dividend 4 times in a year. Plus helps you improve your market understanding.
The trick in this is to prepare well in advance and think through what you want to achieve . You have to do all the thinking and planning before earnings season, if you want to trade this method. Bull market, bear market earnings trade works.
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