Daytrading C (or any other stock's) earnings day

Discussion in 'Trading' started by Bulldog Daddy, Apr 17, 2010.

  1. I've had some success swing trading, (incl. C) but I'm new to day-trading. Assuming I'm comfortable with, say, a 2 to 1 profit/loss stop, is there anything specifically wrong with trading a given stock on the day of earnings? C announces at 8am on MON.

    My idea: execute a trade immediately as the pre-market opens and listen to the earnings call. If good news, I hold on. If bad I get out immediatley.

    My reasoning: C's been on a tear, but knocked out on FRI because of GS news. 7 day ATR is .21: Good news could provide quite a bump, but bad news might not dissolve the price as quickly, given that C stopped exactly on its 10 day EMA on FRI. MACD is hard to gauge.

    Is this a really bad idea (one word response acceptable :) or is there any merit?
     
  2. Makes money = good idea

    Loses money = bad idea
     
  3. The idea about trading stocks on the day of their earnings release (either same day if they announce pre-market or the next morning if they announce after close) is fine.

    But when you say 'execute a trade', what do you mean? Long? Short? How do you decide? You're saying that you'll go long premarket and if it's bad news you get out? In my view, that's not an optimal strat. It introduces an element of gambling into the trading equation that you're probably best to limit if not eliminate altogether.

    Any one of a number of things could go wrong. The stock can easily blow through your stops. The stock could start to tank on good news and you'd be confused as to what to do.

    The way to trade earnings day is to be relatively secular about direction and just trade the volatility. Sure, if a stock announces after market and they have blown away analysts estimates, you can anticipate an upmove in the morning, but how many times have you seen a stock meet and then tank?

    I love trading earnings days. But I definitely don't position myself before the call waiting to see what will happen, except in very rare cases.

    I have no idea what all that stuff about RSI, MACD, ATR etc means : )
     
  4. seems good to me
     
  5. If you have no idea what the market's reaction to the EA will be (up or down), it's a bad idea to have a directional equity position in place because if the news is bad, not only will it be a fast market but there might be a gap. In order to get out, you're going to have to lead price with your order and your fill will be lousy. Unless you're hedged in some fashion, it's an accident waiting to happen. Trading a fast market takes disciplined and decisive reactions.

    A better idea would be to catch the news, identify the move and get on as fast as possible and hope for an extended ride No gap and you're picking the race... or go with a hedged option volatility play.

    As an example, ISRG announced AMC on Thursday. Upon release, iIt quickly ran up nearly 15 pts. to about 400 and then drifted down into the 370's. The drift was very tradeable.
     
  6. BartS

    BartS

    trading stocks pre market on earnings is probably not the best idea there is....the higher the price the worse off you are because the second you put on the trade you're in the hole because of the spread.....and it could be quite a hole since some of the stocks have a $1.00 plus spread on earnings...

    Now considering you're talking about a "penny stock" it's probably ok because the liquidity will be super high and you'll be able to get out easily and painlessly if you're wrong.....

    Either way it is a gamble, I've seen them go up then down, regardless of how bad/good the earnings were....

    A slightly better idea in general would be to wait for the stock to open and wait the first 15 minutes....usually go with whichever direction the stock breaks the 15 min range and hold on for the ride as they usually tend to trend nicely intraday when they get out of the range.....

    GOOG is a great example of that on friday....

    Cheers...