Buying before or after Earnings

[billyjoe]

Mr.Market Members,
I'd like to know what your thinking is on purchasing before or after earnings reports or if it makes any difference. Some have mentioned waiting a couple weeks to see how the market reacts. Others say buy on an initial dip if earnings were good , but received a negative reaction for some unknown reason. How do you handle earnings?
billyjoe

[MEA_1956]

With my eyes closed, I've been burnt both ways. Last one to come to mind was SCHN, good report but wrong time. So I look at it in an over all perspective now. ===> MEA

[spikefader]

In my humble opinion, it's wise to close any positions prior to earnings and wait for the initial after hours reaction. The after hours action will determine your entry executions.

If you're bullish on the stock, wait for the initial selloff after hours and buy at support areas and look for a solid bounce and continuing buying over the following week, where strong runs should be viewed as profit-taking opportunities. Then if you are further bullish on it, reenter after the bullish run is worn off and profit-taking ceases. It's tricky to ride the waves, but attempting to surf is the correct way to approach it.

If you're bearish on the stock, wait for the first after hours spike to resistance areas on the daily chart, and short the pop. If your entry is a good one, and price falls rapidly, hold on for a gap down, and projection gap down target to exit. Fact is, many earnings announcements will result in a pop that is sold off over the next week or so, and in my opinion, shorting earnings is statistically a more rewarding experience than going long....unless the news is really fantastic and unexpected. Usually, good news will be sold, and it will make no sense to the average Joe-six-pack trader.

[Karel]

My way around this problem is always to buy between earnings.



Karel

[billyjoe]

Karel,
I believe a "between earnings" portfolio would do well. All stocks could be purchased 2 weeks after earnings are reported and sold 2 weeks before next quarterly report. Maximum holding period approximately 64 days.
billyjoe