Earnings Delight

Earnings Delight

It was a few months into my rookie year of trading (Trading Experts Mentor Mo) and was somehow profitable. Looking back at those trades I can see how lucky I was especially since I didn’t have a strategy.  I didn’t know how to scan for charts, had no idea what a bull flag was and definitely did not use a stop loss.

I stumbled upon an article that discussed upcoming earnings. I thought I had struck gold!!! This was it…my new strategy…buy before earnings and then ride the stock all the way up. Dollar signs flashed in my eyes like Scrooge McDuck.

I became a CNBC, Bloomberg and Yahoo junkie. I read every article that had “Analysts” on it.  I had to brush up on my earnings. I had to figure out what stocks I was going to buy and I needed the pros opinions. To think I was this naïve is wild, but this was the truth. So I did my homework and read all the articles that I could find while watching Fast Money and Mad Money everyday after work.

(Pro Tip: Turn off the fucking TV)

The week starts off and Cramer is a fan of Adobe. Shit if Cramer is a fan then so am I! I still had a few days to research before earnings were announced. Cramer likes it, ok that’s cool but I need some conviction…What’s everyone online think about Adobe? They are estimating a beat vs the street forecast. Sign me up…I’m a buyer!

So I buy 100 shares at $87 on Friday, earnings were on Monday at close. Now I’m absolutely excited going into the weekend. I am ready for the greatest TGIM (Thank God Its Monday) of my life. I could not wait for the market to close on Monday. Mind you, at no point was I thinking about the risk involved in this trade. All my focus was on the news and what analysts were saying. So the market closes and I’m sitting in my cubicle at work impatiently waiting for the report. Adobe’s cloud business was extremely profitable that quarter. They fuckin’ shattered earnings. The stock jumped $10 post market. At this point I’m freaking out…I’m up a cool $1,000…Holy fuck! My studying had paid off. I closed the position the next day and took over $700 in gains, not too bad. My strategy was off to a great start!

Now at the time I felt like a genius and had no clue that this was a random reward. I was boosting my own ego, giving myself unneeded confidence. Running around the office telling people:

“I’ll probably quit this job by next year at this rate”

“I won’t be around much longer guys, I’ll be trading for a living”.

I was dumb money at its finest. Let’s move onto my next trade: SONC

Oh man, everyone loves Sonic smoothies. I start Googling the nearest one and how many there had in New England…you know I’m trying to figure out if there is a growth opportunity…I’m sure that’s going to come up on the earnings report. What’s my boy Cramer saying? Cramer likes it, he’s saying he could easily see the stock in the $50 range. The “Analysts” slapped a “Strong Buy” recommendation on Sonic. They sold me on SONC, done deal.

I bought 250 shares at $29 the day before earnings. SONC was to report prior to the opening bell. I was at a conference that day and checked my phone “SONC Surprise Beat” read the headline. I am fucking jumping up and down. The stock is up almost $3 post market. I put it in a sell order and close the position for a $600 profit!

2 for 2 the streak continues…up $1300, easiest money I’ve ever made. Barely held each stock for a day, ha I was unstoppable. Two weeks into earnings season, there were still hundreds of companies left to report. Time to find the next play.

The following week, I’m at Starbucks grabbing a coffee before work and I bump into my boy Jimmy. He starts asking me how the market is going, and we get into a conversation.

Myself (Mo) “ Yea bro, I’m just straight killing this market man, I’m up a nice amount since earnings kicked off. How bout you? You holding any positions?”

Jimmy “I got some TSN, AA, FB but looking forward to Apple earnings”

Myself (Mo) “Apple earnings? Why you looking forward to that?”

Jimmy “Dude they’ve beaten earnings past 11 quarters and the new iphone is coming it, guaranteed beat, I’m holding and I’ll probably buy more”

I left Starbucks and rushed to work. I checked out CNBC articles talking about Apple’s earnings and expectations. Some were negative, others positive…but Jimmy has a position.  Comical to think I was caught up in knowing that the kid at work had a position and that influenced my decision. I did my television routine, watching Fast Money, Mad Money, etc. Fuck it, I’m buying…I had a feeling they were going to beat. They beat the past 11 quarters, no chance they miss this one, right? I was in for a wild ride.

It’s 6 days before Apple had earnings and it opens up near $109. It drops to $108 and for no reason at all I think this is a great price. I put in an order for 100 shares and I get filled in at $108.05. The stock closed at $107 that day so I’m down $100. Man, $100 is nothing, after they beat, this fucker is going to gap up to $150 and I’m going to book a nice payday. The next 5 days the stock sells off and by earnings day it is at $103. Earnings were after the bell and I’m down $500 in the name going into close. Who cares right? I’m about to be up $5k as soon as the bell rings.

Ding Ding Ding…The bell rings and my heart is pounding.  I’m ready to celebrate. I’m ready for my big bet to pay off. I had all my money riding on the #1 company in the world. I was ready…fuck…I was not ready. Apple announced a decline in demand for iphones and a struggle in their China market.  Apple missed? They missed???

The stock fell 6% and was now at $97…I was down a cool $1100…fuck.

Now if you hadn’t figured out by now based off my awesome strategy of playing earnings…I was not a Trading Experts member yet. I probably had only spoken to Ben three times and one of them was the day I bought Apple.

He asked me what positions I was holding. I told him I had bought Apple that day at $108, and he mentioned there was nothing significant about the figure I bought. Fast forward to earnings day. I go home and I get a message from Ben.

Ben “Got out before the close right?”

Myself (Mo) “Down over $1k”

Ben “Do you see why earnings are such a gamble?”

I wasn’t going to argue with the man. He was completely right and I was wrong. Besides how much of a dunce would I sound like if I told him “But my friend Jimmy said they were going to beat” Yeah well Jimmy wasn’t the CEO or anyone fucking significant. Opinions don’t matter, the stock don’t care who you are, Cramer, Jimmy, a fucking analyst, the stock simply does not care.

The stock sold off until bottoming at $89. I know you’re probably thinking why I wasn’t adding to bring my price down. It’s because all my capital was tied up in the damn stock amongst other bad positions I did not want to take losses on. I was officially a bag holder, down almost $2k. I held onto the fucker for 4 months and finally sold slightly above my price to make $63 (remember I was down $2,000). (Today as of Jan 30th 2018 Apple is at $175 a $7,500 profit had I not sold for basically breakeven) I was a fool.  I joined Trading Experts that month and needless to say I learned my lesson about the earnings coin flip.

Two months later I watched Shake, before I knew who Shake was, buy Apple off an inside day and take the stock for 15 points on a dollar risk. When 2 months prior I was risking 20 points to make half a point.

That is when I realized there was a strategy to the way Trading Experts trade and ever since then I threw everything out the window that I thought I knew. I listened, I asked questions and slowly started to improve.   I knew I had found the right people to teach me what I needed to know about trading and how to do it the right way.

All in all, however I do not regret those mistakes because they were cheap lessons that I learned on my own with no one to blame other than myself. With most things in life, we learn from our lessons, and the joy or successes is what keeps us going. Hopefully you can take my word from it and avoid speculating on earnings.  

Do you have balls?

Post in your group chat a chart of a stock that was recently at highs and got absolutely destroyed after earnings.