A Simple Strategy That Still Works, And is it Ever OK to Short an Earnings Winner?
Because when I get bored on a Saturday night I research earnings strategy, last night I came across this blog post from November, 2014. While it’s easy to both find and trade these stocks, it’s also one of the most consistent and reliable setups I have traded over the last three years.
The overall concept is this:
Strategy for buying earnings winners on day 2: weak open r/g or breakout over day 1 high $APIC
— Chris Wood (@2alive4925) December 3, 2015And Sykes does a great job summarizing the strategy:
“… you don’t have to guess earnings ahead of time (nor should you), you can wait for the news to come out, thus reducing your risk, and simply buy earnings winners the next day AFTER earnings when they break the day high …”
This is the same setup I’ve been talking about recently with stocks like $APIC and $MDXG.
I only got a small piece of the pie, buying the red/green move over the day one high, but I alerted $MDXG in TimAlerts chat the day before. Everybody in the room had the opportunity to be prepared ahead of time, and get in position to ride the all-day uptrend.
An exception to the rules? #
$NAV proved it had spikability when it gave us a morning rip as a reaction to earnings. I really wanted to dip buy this one, but I began to reconsider when it started to test the support levels at $9. There are a few golden rules when it comes to earnings winners, like never holding through earnings, not guessing on what the reaction will be, and avoiding playing the short side, but I got a different feeling from this stock. A lot of people like to short into strength, but that’s pretty risky with earnings winners, so I’ll be looking for a breach in support like we see above.
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