Okay, as we start this week, I’m well-re…

Okay, as we start this week, I’m well-rested, prepared and ready to confront earnings season with a clear head and emotions checked.  I’ll readily admit that I’m outright excited to see how our stocks react to earnings season.   I do think some of the recently highlighted near-term earnings trades are technically set up nicely and will work out profitably for us in the near-term if we can nail some of the fundamental analysis.

Here’s a recent write up I did for Marketwatch on this topic and I want to post here in its entirety for you dear Trading With Cody subscribers who read the emails:

Anytime you trade earnings, you have to get four things right:

1. The fundamentals. You have to find companies that are having either better (to buy) or worse (to short) than expected fundamentals, usually earnings.
2. The whisper metric. Sometimes traders and investors will start keying on another metric that they think is more important to the long-term earnings than just the recent report.  A few years ago, Apple’s stock would trade up post-earnings if the company reported strong Mac sales, regardless of whether the earnings themselves came out better or worse than expected.  Regardless, you have to pinpoint companies that will be better or worse than the rest of the Street is expecting using good ol’ fundamental research.
3. The earnings season trend.  Other times, it doesn’t matter what the company reports as the broader markets will ramp or fade any company after the earnings report.  I’ve seen blowout quarters from Apple and Google in year’s past only to lose money the day and week after the stellar report.
4. The right way to play it.  You can buy common stock in the better-than-expected companies or just short common stock in the worse-than-expected companies.  Alternatively, as I’ve highlighted in past quarters, you can sometimes find some great option opportunities that will magnify your gains.

I don’t expect I’ll be putting on much trades on Monday and Tuesday, but we’ll start getting some earnings as the week progresses and we’ll start seeing how we’ve gauged the above this go ’round.  I’ll highlight which stocks I’m most heavily positioned for earnings moves today and tomorrow instead of just which trades I’m making.  Let’s rock.