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Trading Lessons

How to Trade Earnings Winners

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Written by Timothy Sykes
Updated 11/21/2023 7 min read
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Everyone knows there are ways to trade earnings winners.

They just don’t know how.

I’ve been playing this same pattern successfully for over 20 years.

While the markets have changed, the same basic setup still works.

It’s one of my favorites to teach folks, especially new traders.

Although I saved the juiciest tidbits for my Challenge students, today’s blog post dishes out key ingredients to smash those earnings trade

Analyzing the Earnings

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How many times have you seen a company report earnings that beat analyst estimates, yet shares decline?

Makes no sense right?

I could spend my time on any company that beats earnings estimates.

However, I like to keep things simple.

Take Nerdwallet Inc. (NASDAQ: NRDS) for example.

The company reported earnings that our Breaking News Chat highlighted before the market opened.

While the company still lost money, it came in with EPS of -$0.01 vs estimates of -$0.08. And revenues of $152.8 million beat estimates of $144.4 million.

Is that good news?

I’d say so. I certainly don’t see anything negative.

However, it’s all about the market’s reaction to the news.

What the Pattern Looks Like

An earnings play setup needs to have quality earnings AND price action that confirms the move.

This is what that looked like with NRDS:

NRDS didn’t have a lot of premarket volume.

But, shares opened up about 13.5% higher than they closed the day before.

However, was the bullishness the stock showed on a Friday that created the setup for a Weekend Trade that I entered late Friday on a dip and rode into Monday for a nice gain.

I managed to snap up 1,500 shares about seven minutes before the close at $9.29, risking just shy of $14,000 unloading them first thing Monday morning at $9.65, a trade that took me less than 30 minutes of work.

Here’s another example of a much larger stock, Palantir Technologies (NYSE: PLTR).

Shares popped some 20% before the open after the company beat earnings estimates of $0.06 by one penny at $0.07 while revenues beat estimates of $556.1 million coming in at $558 million.

Again, this isn’t some monster headline-grabbing beat. However, the price action said this was a tradeable opportunity:

Shares took off like a rocket, not only holding their gains for the day but reaching higher the following day.

In fact, after a few more days of consolidating, the stock took another leg higher.

It’s not just about the earnings news itself but how the stock reacts.

More Breaking News

Once you have those pieces in place, then you can select the right strategy to play.

Strategies to Trade the Pattern

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Some earnings winners will run in the premarket, pullback during the main session, and then take another leg into the close.

Others will wait until the main session to run, either stair-stepping their way higher or finding a high where they pull back from.

I select the strategy based on the context of the trade.

Going back to NRDS, the run happened on a Friday, making it a perfect setup for a Weekend Trade.

That’s the same setup that worked for Direct Digital Holdings (NASDAQ: DRCT), another Weekend Trade.

This same weekend setup worked again with Udemy Inc. (NASDAQ: UDMY) just a few days before, where I scooped up 3,000 shares for $12.275 on Friday, risking a bit more than $36,800, and sold them Monday at $12.66 per share.

What about the ones that didn’t happen on the weekends?

For those, I selected a different kind of setup.

Take BIO-key International Inc. (NASDAQ: BKYI) for example.

This true penny stock didn’t start moving until almost 30 minutes into the trading session.

I didn’t try to chase it.

Instead, I waited for a classic morning panic dip buying opportunity.

Panic dip buys are one of the first strategies I teach Challenge members.

Millionaire students like Jack Kellogg and Mariana Hincapie all started off by learning this same setup.

They learned how to identify the patterns that work and then apply the correct setup.

Discover the Secret to Mastering Earnings Winners

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Tired of watching earnings winners slip through your fingers? It’s time to turn the tables.

While others scratch their heads at market reactions, you could be capitalizing on these opportunities.

🚀 Join our exclusive LIVE training and unlock the strategies that have powered successful trades for over two decades.

🚀 Learn how to spot the subtle cues that signal a big move – from NRDS’s unexpected surge to PLTR’s rocket-like ascent.

🚀 Experience real-time breakdowns of earnings plays, understanding why some stocks soar while others don’t.

🚀 Don’t just play the market – master it with proven techniques for every trading scenario.

Are you ready to transform your approach to earnings winners? Eager to apply strategies that have created millionaires? Your journey to trading mastery begins here.

👉 RESERVE YOUR SPOT IN OUR LIVE TRAINING NOW! 👈

 

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* Results are not typical and will vary from person to person. Making money trading stocks takes time, dedication, and hard work. There are inherent risks involved with investing in the stock market, including the loss of your investment. Past performance in the market is not indicative of future results. Any investment is at your own risk. See Terms of Service here

The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

Millionaire Media 66 W Flagler St. Ste. 900 Miami, FL 33130 United States (888) 878-3621 This is for information purposes only as Millionaire Media LLC nor Timothy Sykes is registered as a securities broker-dealer or an investment adviser. No information herein is intended as securities brokerage, investment, tax, accounting or legal advice, as an offer or solicitation of an offer to sell or buy, or as an endorsement, recommendation or sponsorship of any company, security or fund. Millionaire Media LLC and Timothy Sykes cannot and does not assess, verify or guarantee the adequacy, accuracy or completeness of any information, the suitability or profitability of any particular investment, or the potential value of any investment or informational source. The reader bears responsibility for his/her own investment research and decisions, should seek the advice of a qualified securities professional before making any investment, and investigate and fully understand any and all risks before investing. Millionaire Media LLC and Timothy Sykes in no way warrants the solvency, financial condition, or investment advisability of any of the securities mentioned in communications or websites. In addition, Millionaire Media LLC and Timothy Sykes accepts no liability whatsoever for any direct or consequential loss arising from any use of this information. This information is not intended to be used as the sole basis of any investment decision, nor should it be construed as advice designed to meet the investment needs of any particular investor. Past performance is not necessarily indicative of future returns.

Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”