Wednesday, April 20, 2011

Guessing at the reaction to AAPL Earnings

AAPL's daily 50 day moving average is holding tight for now ahead of it's earnings release, due today after the bell.

Despite what you might read or hear from the self proclaimed "never lose gurus", there's no way to predict what will happen after the numbers are reported. I can show hundreds of stocks where the chart looked great into their earnings report, and the company missed, and vice versa. Those that want to guess what will happen to a stock after an earnings report are pure gamblers, and belong in the horse race book.

If you want to trade a volatility play such as a straddle or combination into an earnings report, then that's a different story. That strategy does not pick a direction, but rather it predicts that range expansion will occur. With the amount of volume now being traded in the options market, the edge is nowhere near what it was even a few years ago. That doesn't mean that opportunities can't be seized and exploited, you just need to do the work. I'm sorry, but there are NO shortcuts!

Unless you have unlimited money to keep throwing at your account if you blow up, there's a a safer way. Wait for the report, then wait for the dust to settle. Afterwards, there will be plenty of time to do your directional analysis.

Michael tiny Saul

tinymjs at gmail dot com

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