Thursday, July 21, 2011

This is why you never hold a stock through its earnings

I had underlined my earnings season strategy in the last post. Here is the link to that post. In a nutshell, the strategy is amazingly simple - NEVER hold a stock through its earnings report. No matter how confident you are about the results, don't do it if you are a short term trader. Sure, you might be very sure that the stock will beat the estimates. But do you know how the market will react to the news? Never trade the news. Its the reaction to the news which is important.

This is from the last post:

"Meanwhile here is a stock that I had posted about twice last week. TZOO was up over 10% yesterday and looks good for more. However, it does report tomorrow and like I have written above holding it through earnings would be pure gambling, no matter how good it looks."

The above was written when TZOO was at around 85 and it went on to make a high of 90.80. It reported earlier today and this is what the chart looks like now.

I rest my case

Take care and good luck!

1 comment:

Doctor Stock said...

I agree - extremely rarely will I hold a stock through earnings. I even recently held one to see it spike up and another one drop. It's just not worth it.