Critical Earnings Breakdown

Hey 5-Star Trader,

As we enter another earnings season, I wanted to take a moment to break down some of the most critical terms that traders must know as we trade throughout the season. As we discussed on Tuesday, there are so many trading and investing opportunities surrounding earnings season.

For a full, one-hour breakdown, join me on Tuesday at 7 p.m. Central where I’ll discuss all this and more – live! Click here to sign up! 

Here are some of my favorite, need-to-know terms:

Earnings Season – Publicly traded companies report earnings four times per year. The majority of companies, especially companies within specific sectors and industries, report around the same time. While the season, in reality, spans across 12 weeks or so (with some stragglers at the beginning and end) most of the action occurs between weeks three to nine. During this central time frame of Earnings Season, there can be upwards of 200 companies reporting earnings per day.

The Hot ZoneThis is the term I use when I’m describing the 21-bar time frame on a daily chart prior to a company’s earnings report. This time frame is critical, as this is generally when a stock begins experiencing a move either to the upside or downside. The reason why it covers 21 bars and not 21 days, is because the days the market is not open do not count. I start at the earnings report date, and then count backward to identify which day the ticker “enters the Hot Zone.” 

Check out this screenshot of Netflix (NFLX) below. The highlighted portion refers to the Hot Zone for first-quarter earnings. NFLX entered the Hot Zone on March 18 and will report earnings on April 19. This means it is currently “in the zone.”

In the Hot Zone, I will either have a neutral, long, or short bias for a particular stock based on past pattern, overall macro view, consumer sentiment, and statistics. I use two different terms to identify these setups.

Run into Earnings – This is what we call a bullish move into an earnings report. This is because the stock will likely “run” going up to the report. The idea behind this trade is that I am identifying a strong ticker that I can trade higher going into, but not through, the report. This setup is primarily pre-earnings, as the earnings report itself can shift the pattern. But, it doesn’t matter, as I’m out of the trade by then!

Earnings Destruction – This is the pattern that appears when a ticker is more likely to fall going into earnings, due to a lack of earnings anticipation. This can occur both pre-earnings, while the ticker is in the Hot Zone, and it also likely continues post-earnings.

When a stock enters the Hot Zone, opportunities for trading arise – if you know where to look! But, the earnings opportunity doesn’t stop there.

Additional opportunities can be found in trading options overnight on the earnings reports themselves, and for trading post-earnings trends. Stay tuned for my next newsletter, on Tuesday, March 29, where I’ll be discussing some of my favorite opportunities “in the zone.”

And, don’t forget to join me Tuesday evening, for a full breakdown of what you need to know this earnings season… and more! Click here to sign up! 

-Danielle =)

Up Next...

‘Tis the Season: Stocks Splits

Nvidia Stock Split: A Recap Nvidia (NVDA) announced its stock split on May 22, 2024, and since then, it’s traded from a (split-adjusted price) of around $95 to a new, all-time high at $129.74 (as of this writing). It’s still going and is currently up another +2% four days after the split, making it significantly … Read more

Read More

Bullish Setup in NFLX

I’m eyeing NFLX for an entry to the long side before the next upcoming earnings report in July. Check out the video for my upside targets, setups, and various options trade ideas.   P.S. To join us in the Simpler Central trading room, click this link to learn more!      

Read More

Trading GameStop for a Pre-Earnings Short

Hey traders! GameStop has 25% short float, and Roaring Kitty has thrown massive fuel on the fire right before earnings. With GME trading higher on high volume, and breaking through levels of previous highs, that sets it up for a potential short squeeze pre-earnings. GME will typically trade higher before earnings, as buyers speculate and … Read more

Read More

Subscribe Today!

Want my up-to-date analysis, setups, top trading tips, and more? Be a Five Star trader, and join my free newsletter today!

Sign Up Now