The "official" start to earnings season began when Alcoa reported its numbers after the bell last Monday. The market liked what it saw and heard with AA up close to 10% by the time the week ended. We also saw some major banks report their numbers with mixed results. But that was only the tip of the iceberg as thousands of companies will be reporting their earnings over the next several weeks.
There's no telling what the collective results will end up being but looking at the market action of late, expectations could be greater than most expect. After all, both the Dow and S&P are at record highs. On the other hand the NASDAQ continues to lag, indicating reduced expectations on the tech side.
What makes earnings season so interesting is you never know how the market will respond to specific numbers. In other words a company might beat all expectations and still see its stock slide. Or a company might come up short and see its stock rise. And this is what makes it tough to hold a stock into an earnings report; you could wake up to a stock down substantially which is never a pleasant sight.
One way to avoid being blindsided is to wait until a company has reported its numbers, see how the market responds and then wait for a good entry level on a pullback. For example, JP Morgan beat expectations and got a nice pop the same day its numbers were released. So it could be in high demand if it gives up some of its gains as traders gravitate to those stocks that beat expectations. Being patient could lead to a better entry point as seen in the chart below.
At EarningsBeats we are constantly scanning the market for companies that beat or miss earnings expectations. This in turn allows us to provide a list to our members. From that list we look for the best reward to risk opportunities, issuing alerts with entry price, price target and stop losses. If you want to see a sample of the most recent alerts and results just click here.
Earnings season can be exciting but it can also be costly if you aren't careful. Trying to "guess" how the market might respond to an earnings report is a crap shoot at best. There's no need to risk your precious capital on something you have no control over when you can potentially profit by being patient and looking for solid opportunities once the dust has settled.
At your service,
John Hopkins
EarningsBeats
