photo credit: {Guerrilla Futures | Jason Tester}
There are several stock trading systems that trade news announcements. Trading news is difficult. There is a pitfall and a temptation — trying to judge the implication of the news versus the reaction of the stock price.
Have you noticed that what should be good news is considered bad, and bad news is interpreted as favorable? There are a variety of interpretations and as traders we’re not smart enough to know the market’s reaction.
Some news releases are more important than others. But the piece of news most often traded is the earnings number.
Here’s how you may want to trade earnings news. Obtain a calendar of upcoming earnings announcements. Yahoo has a calendar, here. Screen some stocks that meet your price and volume requirements and start following the ones due to report. Watch for a period of consolidation prior to the release. Once the earnings are public information trade in the direction of the breakout.
Be very careful. Momentum may not sustain the move so being prepared to exit is crucial. Ideally, a stock will quickly trade up on good news and stabilize at the higher level. The next move should be an extension to the upside as more traders realize the opportunity and decide to buy.
There are abundant opportunities for breakout traders that want to trade earnings announcements. Try and avoid having an opinion about the news release. Price will tell you how to trade the information.
Both of these stocks had favorable earnings. The initial reaction was good, but . . .
ECPG had good earnings, as well.
OSK had earnings that were spectacular –
In summary, trade the charts, not the news.
