Awesome Stock Trading Results Using this Simple Formula
ALSO BY PETER D. SCHNEIDER Top 14 Stock Traders Mistakes and How to Avoid Them How to Make Money Investing in Marijuana Stocks the Smart Way–How to Profit from the coming 1 Trillion Dollar Market.
Awesome Stock Trading Results Using this Simple Formula Peter D Schneider
Text copyright © 2018 Peter D. Schneider Cover art copyright © 2018 Peter D. Schneider All rights reserved. No part of this book may be reproduced or transmitted in any form by any means, graphic, electronic, or mechanical, in- cluding photocopying, recording, taping or by any infor- mation storage or retrieval system, without permission in writing from the author, except for the inclusion of brief quo- tations in a review, article, book, or academic paper. Interior layout and design by www.writingnights.org eBook formatted by www.writingnights.org Book preparation by Chad Robertson For additional information, contact Peter D. Schneider by email: [email protected] ISBN: 9781095715109 23 22 21 20 19 18 17 8 7 6 5 4 3 2 1
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FREE GIFT I’d like to invite you to accept my gift of a Free Master Toolbox if it feels right for you. Because you bought my book, I would like to extend a Special Invitation to you. Receive my Master Money Making Toolbox FREE at hotstockstrader.com/toolbox. Throughout the book you will learn about critical trading windows around and through a company’s Earn- ings Release date and time, and how these trading win- dows are critical to your overall success. This toolbox will identify the window and illustrate the steps you need to take to Time Your Trades for greater success. My goal is that you make more money-making trades, and lose less money trading. The information in this book will help you navigate the most dangerous and most money-mak- ing times in the market. Learn to understand and use the Golden Magical Two-Week Window of Wealth. Statis- tics show that many people only open a book to see the chapters and many folks don’t finish reading books. This is the reason for my special offer, for this gift, at the be- ginning and end of the book.
DEDICATION To Mindy Schneider My wonderful supportive wife who always helps me see my success path through the highs and lows of life and as our lives continue to unfold. Also through all my ups and downs trading in the stock market.
EPIGRAPH I try to do the right thing at the right time. They may just be little things, but usually they make the difference between winning and losing. —Kareem Abdul-Jabbar Take care of the little things and the big things come out all right or better than expected. —Mike Schneider (my Dad)
CONTENTS Also by Peter D. Schneider..................................... ii Free Gift............................................................................ vi DEDICATION...................................................................vii EPIGRAPH.........................................................................viii CONTENTS ....................................................................... ix FOREWORD ...................................................................... xi ACKNOWLEDGEMENTS............................................ xiii 1. Stock Market Earnings Calendar and Game Rules .................................1 2. Stock Market Earnings Season: The Playing Field ....................................................7 3. Earnings Season for a Specific Company: YOU NEED TO KNOW THIS!................................9 4. Bellwether Stocks and What to Watch For..................................17 5. What’s Happening Inside the Company Walls and Behind the curtains..................20 6. The Earnings Party: How to Trade for Success..............................24 7. Rumors: Buy on Rumor; Sell on News ......30
8. Paying Attention: Work your Trades; Don’t “Play” the Market ................................... 33 9. 3 Little Discussed Facts That Wall Street Doesn’t Want You to Know.......................... 36 10. G.U.T.S. Go Use This Stuff............................... 42 About the Author .................................................... 44 Free Gift.......................................................................... 47 x
FOREWORD I wrote this book because no one, and no trading course, showed me the big picture of prospective and timing when it came to trading around a company’s earnings re- lease date and time. I did not understand, or compre- hend, the actual events and consequences of the earnings release as they unfolded and how they affected my stock trade. My trades consistently ran into a buzz saw, hitting me with big losses. This book gives you the opportunity to see your stock trade as it relates to the Earnings Cal- endar, Earnings Season, and the actual dynamics of the earnings release on stock prices. Until I learned what happens before, during, and af- ter a company’s earnings release, a high percentage of my stock trades lost money. The pattern repeated itself until I researched and learned the basic secrets to trading earn- ings releases successfully. Every fellow trader I have talked to has been–or will be–burned and will take big losses because they don’t know what happens during earnings release season and their stock trades’ actual
earnings release. In this eBook you will get the secret in- sights, stories, and actual behind-the-scenes activities that shroud the mystery of Earnings, Calendar, Seasons and Release Date. You can learn the lessons of what successful traders know and use this knowledge to avoid losing money dur- ing earnings season releases. Once I learned these les- sons, my trading became much more successful. When I broke the rules of earnings season trading, I almost always paid the price by losing money in my trade. If you have been trading and have suffered through earn- ings releases, you will understand the pain, frustration, and upset, too. For those of you who haven’t traded, you get an express pass to avoiding major mistakes during earnings releases. One thing I can say is that very few traders are one- hundred percent faithful to their trading rules. You will find yourself forgetting that you need to know your stock trades’ earnings release date and time, and you will suffer the consequences. When you hold over your stock trades’ earnings release, once in great while you will get a huge win, but predictably, a high percentage of your stock trades will go down in value with huge losses after the earnings release party. Pete Schneider Discovery Bay, CA June, 2018 xii
ACKNOWLEDGEMENTS To all my mentors, coaches, friends and support team. Jim Edwards Ryan Laughlin Sandra De Freitas Mike Scott Stu McLaren Chad Robertson Angie Alaya
1. STOCK MARKET EARNINGS CALENDAR AND GAME RULES Every publicly traded company in the US has to file an audited, quarterly financial report with the Se- curities and Exchange Commission (SEC). Typ- ically, companies file these electronically. These elec- tronically filed reports are made available to stockholders and the general public via the SEC website on published reporting days the company sets and announces. A pub- licly traded company has four quarters in its financial year. Every quarter, the company reports to the SEC and
2 PETER D SCHNEIDER releases the information to the public and shareholders on a pre-announced day, at a pre-announced time. The company’s fourth quarter is the year-end financial report. Year-end does not always coincide with the calendar year end (December 31). Example: Professional football–the game has four quarters, the last quarter being the final re- sults for the game. Each quarter’s progress is written down, with the statistics of the game summarized. That summary for the football game’s quarter can be likened to the earnings release data. Unlike football, a company can ask for an extension of time to adjust their report. This is rarely done and is a signal that a problem is the source of the delay. Wall Street hates delays on earnings reports. It will sometimes happen that various sites publish erroneous reporting day information—information not based on the actual re- lease information given out by the company. You want to find the confirmed release time and day. The top level executives have a “QUIET PE- RIOD” mandated by the SEC–a two-week time frame in each quarter during which what they can and can’t say to the public is regulated.
AWESOME STOCK TRADING RESULTS 3 That way their stock cannot be manipulated by good or bad news. When a company publishes, or releases, the com- pany’s earnings, all interested parties—irrespective of whether the party owns stock in the company—have ac- cess to the quarterly results. After the earnings release most companies will have a conference call to discuss their results, provide insights—good news or bad—and contextualize the company’s financial performance. The publicly announced conference call time and date will have a toll-free call-in number that anyone can access— again irrespective of whether you own stock. Many com- panies have outside analysts who follow the company and issue their own reviews, reports, and projections on the company’s performance. During these calls, the analysts will ask the CEO, CFO, or c-suite executive hosting the call, the tough questions. This is an attempt to drill down deep, to un- cover more detail, to determine what is really going on in the company. Almost everyone will have a chance to ask the com- pany’s executives any question and try to probe for the good and bad news that the company may not want to discuss in greater detail. Anyone is free to call in and lis- ten in on the live call. Some stockholders might be given the chance to ask the executives questions about the
4 PETER D SCHNEIDER company’s performance. You, yourself may be given the chance to ask a question. During the conference call, most companies will provide a guidance number for sales and profitability for the next quarter based on the economy, the business sea- son, and other factors. This is laying the groundwork so investors know what to expect in the next quarterly re- port. A company’s year-end report focuses on the com- pany’s performance over the past financial year, and then looks into the future. Based on all the information the company’s executives have, the year-end report gives guidance projections for the coming year’s performance. The executives give financial benchmarks on the coming year. During these conference calls, company executives can talk freely about factors that can affect their com- pany’s performance. They can release information on customers, relay good news, bad news, and anything else of value. This is when they are allowed to talk to all in- terested parties. One thing Wall Street hates is surprises. Especially if the company hid facts in the previous quarterly guid- ance. If the news is really bad, the trading community will punish the stock price. If the company disappoints on their guidance numbers, the stock price will suffer. There are a number of larger companies–INTEL for
AWESOME STOCK TRADING RESULTS 5 example–that have fixed dates every quarter where the company provides Wall Street, company analysts, share- holders and all interested parties an update of the com- pany’s progress for the present quarter. That release is done publicly, so again, the stock price cannot be manipulated. The company’s executives refine the guidance for the investing community so the company’s quarterly performance doesn’t shock Wall Street traders. Companies can make earnings pre-releases under SEC guidelines and may do so when the company is do- ing better than predicted. Wall Street does not like big surprises, not even when it’s good news. Surprises put the professional traders at a disadvantage. One important tenet of being a publicly traded company: Don’t hide big news, good or bad, from Wall Street. This is the reason companies may pre-announce and pre-release any bet- ter-than-expected news. The executives cannot talk about certain news- worthy items during the last two weeks of the quarter as it relates to earnings during the quiet period. If the news becomes public infor- mation, then the executives have to follow the rules set by the SEC on how to respond. Many times rumors surface with companies’ earnings release dates; rumors that goose the stock price or can drag the stock price down.
6 PETER D SCHNEIDER The SEC has issued specific rules on what, when, and how company executives release earnings infor- mation. When major bad news is reported, such as a loss of a big contract, a lawsuit, or other serious matter, the company will respond per the SEC guidelines. Each company has a financial year-end: the fourth quarter. The fourth quarter is a combination of all the four quarters of company performance. At the year-end, there is a shareholders’ meeting. Every shareholder is en- titled to attend. Every company publicly communicates the meeting place, files the time and place with the SEC, and posts the meeting time and place on the company’s website. In that filing are resolutions and matters that come before the Board of Directors. If you are a share- holder, you can attend any shareholder meeting—even if you only own one share. At a shareholders’ meeting you get to see and hear the executives of the company as they discuss the com- pany’s performance and projections into the next year. Shareholders also vote on resolutions, published issues, and actions that the board of directors recommends. All shareholders are sent information that is going to be pre- sented at the shareholders meeting in advance of the ac- tual shareholders’ meeting, including a ballot. Shareholders can vote by mail or electronically, de- pending on the system the company is using.
2. STOCK MARKET EARNINGS SEASON: THE PLAYING FIELD In chapter one, we learned that a company has four quarters, with the fourth quarter being the year end. Also, generally companies set some guidance for the upcoming year and quarter. There are many stock ana- lysts who also set their own guidance numbers for what they expect that company to achieve. In the stock market there are four earnings sea- sons—or periods. Many companies fall into these main windows of time. The quarters look like this, with quar- ters divided into:
8 PETER D SCHNEIDER January to March – with earnings release in April April to June – with earnings release in July July to September – with earnings release in Octo- ber October to December – with earnings release in January You want to know your company’s earnings dates and earning seasons and how they affect the stock you’re trading. The seasons in nature–winter, spring, summer, and fall–may also have an effect on a company’s financial performance if that company’s products and/or services rise and fall with season sales. An example is the winter (Christmas) holiday sea- son, when many shoppers are buying holiday presents and supplies that may affect a company’s performance. Companies like Apple have huge swings in this particu- lar season. A company that sells farm equipment will be slow. A lot of companies are affected by these seasonal swings and a trader needs to be aware of them. The eas- iest way to find out about seasonal swings is to go to your charting service, or to http://www.finance.yahoo.com and pull up a chart. If you want to know how your finan- cial advisor, stock picking service, or your own stock se- lections are doing seasonally, just check the chart.
3. EARNINGS SEASON FOR A SPECIFIC COMPANY: YOU NEED TO KNOW THIS! The basics are these: companies generally have earning seasons divided into four quarters, with their designated final fourth quarter being their year-end quarter. What you need to know before trading a stock is where a company is in their earnings season, and their earnings year.
10 PETER D SCHNEIDER Release Date To research a company you can go to www.finance.yahoo.com and type in the company’s ticker symbol and search for earnings release dates. For beginners, you can type a company’s name into any search engine, adding the words “ticker symbol,” and the search engine will give you that company’s ticker symbol. No company will have the exact release date year af- ter year. Your research will show you a pattern of dates which will be close to the present release dates. The next release date will be given on sites like: www.Nasdaq.com/earnings. Release Time Another fact you need to know is the release time. All companies release their earnings electronically, either be- fore the market opens or after the market closes. Make sure you get that information as you research your trade. • If you are going to trade a stock short term, look for the next earnings release date and release time: B= before the market opens at 9.30 EST or,
AWESOME STOCK TRADING RESULTS 11 A= after the market closes at 4 PM EST. • If you’re trading for the long term, you still want to know the next earnings date and release time, as well as the approximate guidance for the next three quarters. As you follow your stock and see it going up or down as it approaches your earn- ings season, you have fair warning of the direc- tion the earnings release is leaning. • If you are trading short term, you not only need to know the next earnings release date, but also how the stock is performing into that event. Trading Platform It is my experience and my opinion that even if you trade a platform or system, you should always know your earn- ings date and release time. NO EXCEPTIONS. The biggest surprises happen on a company’s release date. Many individual traders buy a trading platform that has signals—go or no-go, red- or green-light—or is set to a trading pattern that tells you to enter or exit. This is a special note for you on trading sys- tems, trading platforms and trading strategies. I have not seen an individual trading platform that accounts for earnings release dates. The exit signal given by systems will not account for
12 PETER D SCHNEIDER the earnings play. When the trade crosses past the earnings release, the exit signals will become an INSTANT lagging indicator. It will tell you to exit the trade after the wreck has already hap- pened. You cannot rely on these exit signals to maximize your profitable trades. If you have set exit points for a sideways or downward trade, with stop loss or trailing stops, they will be rendered ineffective. My bet is that only the smartest, wealthiest Wall Street trading firms have an instantaneous trading system for this event. News Alerts The next piece of insight you should have is news alerts. You can scan a company’s name on a search engine and find out what news is coming out on the company. There are also web sites where you can get alerts sent to you when that company has news. Many trading companies have systems for their customers for news alerts. Three things can happen going into an earnings date, and there are three possible results of earnings news. • The chart is going in an upward trend • The chart is going in a sideways trend • The chart is going in a downward trend
AWESOME STOCK TRADING RESULTS 13 Look at a company’s chart action (these can be found at various sites like www.finance.yahoo.com) and determine the trend of the company you’re interested in. Here are some examples: Upward Trend
14 PETER D SCHNEIDER Sideways Trend
AWESOME STOCK TRADING RESULTS 15 Downward Trend After earnings releases, stocks tend to shoot up fast on great news or plunge on bad news. Stocks that release earnings and guidance numbers that are within what was expected of them tend to stay at the same price for
16 PETER D SCHNEIDER twenty-four hours. The stock market digests the infor- mation and the share price tends to stay flat within a trading range. If the market loses interest, the stock will trend down. Then the stock price will resume a pattern. • Upward patterns continue to go upward if good news is above expectations. • Sideways patterns go down unless great news is above expectations. • Downward patterns continue unless some great news is released. For further research, look at previous years’ quarterly performance and see if there are seasonal spikes to the upside or downside and to see if a stock has a seasonal pattern. Do a spot check before you buy the stock to see where you are in the stocks’ earnings season. It is the wisdom of stock market experts to never hold over a short-term position of a company’s earnings. There is a two-out-of-three chance that the stock will drop in price. In Chapter six you will see what happens at earnings parties and why you want to leave before midnight.
4. BELLWETHER STOCKS AND WHAT TO WATCH FOR As the earnings season approaches, there are stocks called “Bellwethers” that help shape Wall Street and enlighten investors and interested parties on the state of the overall economy. The Bell- wethers’ earnings releases foreshadow how the whole earnings season will unfold and how industries are faring in that economic time period. The Bells are delivering the actual news as to how well or poor the economy is doing. If the predictions are that the economy is doing well or poorly and the Bells
18 PETER D SCHNEIDER start reporting this, the market can do THREE THINGS: Go up, Sideways or Down. Watch these Bells’ reports, and pay close attention because your trade may be in jeopardy if the market turns before your earn- ings are released. These Bellwethers are leaders in their industries in their size, importance, and earnings power. Remember, bad news travels fast if any stock disap- points. The first release Bell is Alcoa. They are the alu- minum producer that tells price, demand/usage, and what aluminum sales will look like in the next quarter. If you’re holding a mining stock, a mining equipment man- ufacturer, or supplier to mines, and the news is bad, you could be shot out of your saddle in your trade. MARK THIS DATE FOR BELLWETHERS JPMorgan Chase is the first of 30 stocks in the Dow in- dustrials to release their numbers. That is one of the most powerful releases because it is such an effective indicator of how the economy is doing—interests rates affect busi- ness borrowing and forecast expectations for the banking industry and economy. The Bellwethers companies delineated below are listed in alphabetical order and not in the order they re- lease earnings. Be sure to check their earnings release date. Alcoa – Aluminum equipment
AWESOME STOCK TRADING RESULTS 19 Apple – Consumer electronics AT&T – Telecommunications Berkshire Hathaway – Largest Investor Company Bank of America – Banker Cisco – Networking Company Coca Cola – Beverage Company Exxon Mobile – Energy Google – Internet/Advertising IBM – Computers /Business systems Intel – Semiconductors JP Morgan Chase – Financial Services Microsoft – Software Pfizer – Pharmaceuticals Proctor and Gamble – Household products Wal-Mart – Largest retailer My personal story of how one Bell can affect another concerns AT&T and Apple. During an Apple trade that I was working, AT&T released their earnings in advance of Apple, supplying sales and profit numbers that were based on Apple’s performance. This information gave insight to Apple’s earnings, and because it was negative, drove Apple’s share price down before they actually re- leased their earnings report. I lost money on that trade. Be aware that your stock could be greatly affected by a Bellwether’s release, and in the case of okay or poor results, could cause your trade to go even more south.
5. WHAT’S HAPPENING INSIDE THE COMPANY WALLS AND BEHIND THE CURTAINS This chapter is my personal take on having ser- viced Fortune 500 companies and the insights I gleaned. This is not advice, so please take what is usable and toss the rest. The SEC has specific rules for executives in a company for keeping financial and other sensitive information private until that company’s release date. Spelled out by the SEC, there are things senior ex- ecutives can and can’t say and information they can and
AWESOME STOCK TRADING RESULTS 21 can’t release per these rules and regulations. INFLECTION POINT TO WATCH All publicly traded companies must publish the actual last day of their quarter. That is the basis for the earning release information. These fourteen to sixteen days be- fore a company’s actual release can be a foretelling of earnings release numbers to come. Internally all the departments have delivered their results and accounting is rolling up those results into the earnings release. In many cases, many employees are vested in bo- nus’s— think sales people and management. Part of the results will determine rates for 401 or other retirement benefits. From the published end of the quarter or year- end results are followed closely by employees and their family or friends, other than top level Management which are restricted from trading stock. As a trader you should watch your charts very closely. The price, volume and other indicators you use, (a program called TC 2000 for instance) even charts money steam should be going up. If they are going sideways or down, then you should brace for two to three times, per experts, that your trade could be going down upon earnings release. The critical time is two weeks before the release of the company’s
22 PETER D SCHNEIDER earnings results. Unless an SEC investigation happens, or a major news event that is not company directed, (think the BP Oil spill as an example), this is the quiet period. Big companies tend to have huge institutional in- vestors that help steady a stock’s price as it approaches earnings release. In smaller, less institutionally held companies, there tends to be more stock price movement as earnings re- lease dates approach. Senior executives are still bound by SEC rules and want their employees to keep quiet about their company’s performance. Many of us know that the one thing all organiza- tions have is the grapevine. News is always traveling in a company. While this can be news of things that are really about happen; often it’s no more than rumors. Watching a company’s stock chart the two weeks before an earnings release can sometimes tell you what may be going on inside the company. All of a sudden, you might see the stock is moving up as employees start telling friends or family members to watch and/or buy their company’s stock. Inside people tend to boast with good news in good times and remain silent with bad news. The smartest employees will tell their family mem- bers to dump their stock if there is a problem. Experts and savvy traders agree that earnings season is the time of year when stock and options prices can
AWESOME STOCK TRADING RESULTS 23 jump the most and produce incredible wealth. What can you do to take advantage of the quarterly earnings and the Golden Magical Two-Week Window of Wealth? In each company there is upper level man- agement not covered by SEC regulations, and lower level (bean counters) accountants who have detailed access to the company’s performance. These are the true insiders, people who know what’s going on inside a company. These are people who are legally prohibited from acting on this information; doing so would be illegal. Any movement in big blocks (large numbers of shares being bought or dumped) is closely monitored. So, what do they do—these insiders? Well they can buy stock options, which is a subtle work around that al- lows them to take advantage of what’s going to happen when earnings are released. Study after study has shown that small and steady changes in options pricing can predict movement in the underlying stock. If you’re an options trader pay close at- tention. There are services that monitor changes in op- tions pricing as well as which options are getting sold or bought in huge volumes. The Golden Magical Two- Week Window of Wealth is supercharged creating phe- nomenal wealth for options traders. One teacher I had said, “It’s the easiest/fastest way to make money that’s not robbing a bank.”
6. THE EARNINGS PARTY: HOW TO TRADE FOR SUCCESS The following analogy best describes what hap- pens prior to the actual release date and time of a company’s earnings results. Let’s look at the process of being invited to a party, as an example: 1. A special invitation is sent out to you in advance requesting you attend a party for an event— birthday, wedding, anniversary or other special celebration. 2. You decide you’re going to go to this wonderful
AWESOME STOCK TRADING RESULTS 25 party. You put this date down in your calendar. 3. This is going to be a gala affair. You start select- ing your special clothes; a woman might go out and buy that right dress or outfit. You’re going to be prepared at least two weeks in advance. 4. You get excited that you’re going to meet won- derful friends and family, as well as new and in- teresting people. 5. You wonder what food is going to be served, what kind of music will be played, and about the layout and details of the event. 6. The week before you go to the party, you look forward with anticipation. 7. The day of the party, you line up all the trans- portation details. You’re definitely going to the party. 8. You get to the party and three things can hap- pen: You’re excited, you’re okay, or you’re bummed out that this is not what you were ex- pecting. 9. An actual toast is made; the birthday song is sung and candles blown out; an acceptance speech is made. The “event” has been crowned. 10. At this point the party can go into full swing, people can start to slow down and leave, or the crowd can run out the door en masse. 11. After the party—even after having a great
26 PETER D SCHNEIDER time—the party guests go back to their lives and move on. Great parties with great hosts make sure their guests get party gifts, souvenirs, and remembrances. Hosts send pictures, thank you cards, and memorabilia. The great memories and feelings continue long after the toast is made; the party lives on. 12. Parties that were good tend to have lingering memories but fade over time. Parties that were terrible leave a bad taste in your mouth, and if another invitation were to come to you, you would decline. The party process described above is the same se- quence of events that happens leading up to a company’s earnings release. I call it the EARNINGS PARTY. For a publicly traded company, this happens every quarter with the biggest party being the fourth quarter year-end results. • Little companies have little parties and big com- panies can have huge parties. • Company executives—generally the CEO and the CFO—have to make the Party Toast (give the actual results). • All shareholders have a right to attend all public company events relating to earnings releases.
AWESOME STOCK TRADING RESULTS 27 • Many companies hold public conference calls where company executives talk about the com- pany’s performance, good and bad news, and fu- ture events and news. They can give guidance numbers, communicating what they believe is going to happen in the future quarter, and discuss the economic conditions they believe are going to unfold • The fourth quarter results are tied to a company’s annual shareholders’ meeting. This, too, is a posted event that every shareholder—even one who owns just one share—has a right to attend. • At the annual meeting, actions are taken on ei- ther reelecting previous board of directors mem- bers, or electing new directors. Actions are also taken to certify the financial results and accept them. Votes are taken on any new proposals from the Board of Directors or proposals from share- holders. • There can also be action taken to split the stock by a filing known as a definitive 14A. How to work the earnings release party for your success in trading • You should have compelling reasons for going
28 PETER D SCHNEIDER into a trade, based on your trading profile, system and style of trading. One factor for determining whether to attend the party is whether you’re a short-term or long-term trader. • You always have a standing invitation to attend an earnings release party. Make sure you find out exactly when and at what time that party is going to start, the earnings release date, and if it is be- fore or after the market is open or closed. • There are three things that can happen at an earnings release party: The news can be great; the news can be okay, on target and on course; the news can be bad. • Seasoned professionals will tell you that you should not hold over your short positions because two out of three scenarios will have your stock price go down if you don’t have great earnings. • Even great earnings release results tend to push stock prices up really fast. Within 15 minutes af- ter the opening bell on the stock market, or the opening bell the day after a stock reported great results after hours, the huge rise could be pulled back as some traders take their profits. This pulls the stock price off their highs as the stocks trade for the day. With a hot stock later that day or during the next few days/weeks, the upward trend can continue.
AWESOME STOCK TRADING RESULTS 29 • After an earnings season party, the stocks will take their respective action and then tend to re- sume their trading pattern, up, sideways or down. If nothing else, all traders should have their compel- ling reason for getting into their trades, and this includes knowing when the next earnings release party is. Unless you have a sure bet on a short position, you should consider that the odds are that sixty-six percent or more of the stock will lose some value. If you trade a long-term strategy and own more than 100 shares, with proper training you may want to sell a cover call—an ad- vanced strategy to protect from the stock price going down.
7. RUMORS: BUY ON RUMOR; SELL ON NEWS We talked about the earnings release party in Chapter 5. Here is another part of a stock trader’s ultimate success. The saying I learned long ago is, “BUY ON RU- MOR, SELL ON NEWS.” Think about the earnings release party with the idea that there is going to be a mys- tery guest or guests, or a surprise offer or gift—some- thing dramatic is going to happen. Anticipation is one of the greatest lures; picture a giant birthday gift and the allure it held for you.
AWESOME STOCK TRADING RESULTS 31 This is the same with rumors associated with a stock you’re trading. A. You have a compelling reason for getting into the trade. B. You know at least your next earnings release date and time. Long-term traders should know all four future earnings release dates. (see www.earningswhispers.com and www.Nasdaq.com/earnings. Note, there are subscription model services to track stocks, like www.briefing.com.These send out alerts that you request—alerts, earnings and updates they monitor. Just another tool for you if you want that kind of service.) C. A daily scan of any internet server—Comcast, MSN, Google—for your companies trading symbol will give you highlights or rumor news. Many company executives use the good rumor to their benefit—a tie-in with earnings release dates. D. Be aware that the anticipation is more powerful than the actual news, and in most cases a run up in stock price will stop and pull back when the actual news comes out. Tie it into an earnings release date, and it can do one of three things. In most cases it will pull the stock price back.
32 PETER D SCHNEIDER E. Remember, a bad rumor is more powerful than good news, so if you enter a trade and bad rumors are swirling, and your charts and indicators are going down, you need to think: I should be heading for the exit.
8. PAYING ATTENTION: WORK YOUR TRADES; DON’T “PLAY” THE MARKET Many people talk about playing the stock mar- ket. The professional and seasoned traders, whether they are managing clients’ accounts or just their own money, will tell you it is all about work- ing your trading platform and trades. It doesn’t matter if you’re working part time on your trades or full time, you need to operate it as a business owner.
34 PETER D SCHNEIDER When you do your homework/fieldwork, it is to set up your trading for success. I wish in el- ementary, junior or high school that some wise, wonderful teacher would have just said, “We give you homework to do so you learn the les- sons we teach and gather information and come up with the right answers. We don’t want you to keep making the same mistakes repeat- ing history over and over. If you don’t do your homework, most times you won’t be success- ful. Do your homework and you will be suc- cessful.” – Peter Schneider: the teacher. Now homework doesn’t have to be hard or take a lot of time. It does need to be thorough. Many individual stock traders will buy some kind of trading platform that will give you a signal to enter and exit a trade. This is based on formulas, trading patterns, candlesticks or a host of various technical triggers. Many individual stock traders will buy a stock picker subscription service for this entry or exit trading style. The one area that seems to be lost in these trading plat- forms is training to understand the basic earnings release structure that affects all stock trades. One great tenet in history is the saying,
AWESOME STOCK TRADING RESULTS 35 by William Shakespeare: “Know thyself.” One great tenet of stock trading is: “KNOW THY EARNINGS RELEASE DATE AND TIME OR PERISH.” – Peter Schneider: painfully seasoned trader. Active trading can be a costly education. Don’t be lazy and not do this homework or fieldwork to complete your trading skills. To not do your homework will kill you and rob you of your money. You will repeat history until you run out of money or learn this valuable lesson. How do you stop losing trades? Find out what you doing wrong and correct it. Even if you have a trading platform, I have never seen one that accounts for earnings release dates. If you have a separate trading account that is being professionally managed, check your trading history re- sults from your fund manager to learn what happens dur- ing the past trading through earnings season in your ac- count.
9. 3 LITTLE DISCUSSED FACTS THAT WALL STREET DOESN’T WANT YOU TO KNOW Are you an Individual stock trader? Do you need to make more money-making trades, but you feel like powerful Wall Street institutions and their leaders are against you? Do you have questions about making successful trades? May be you need some tools to help you? Well look no further because this arti- cle will give you three little discussed facts that Wall Street insiders don’t want you to know. Best of all, these
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