How I use earnings in my trading, and a look at MON and RIMM

Someone said that the we have had the "largest three-week move in stocks since 1938". Wow - that's quite amazing. Does this signal the all-clear? I don't know, but I sure hope so. I would much rather go long than short, but I'll take my setups either way.

With earnings season coming up, I wanted to share some of my thoughts on how I use earnings along with chart setups to build a watchlist of stocks to trade. I am not a big fan of holding stocks into earnings announcements. Even though that's how I made most of my $$ a few years ago - anyone who remembers Forward Industries (FORD) and Dynamic Materials (BOOM) knows what I am talking about. I remember riding these for 200% and 300% gains (among others) - aaah, the good old days!

But knowing HOW to trade a stock prior and post earnings takes out the 'unknown' factor and gives you a much better advantage to trade. In general, I usually look at 'whisper' numbers for a stock that interest me at a site like EarningsWhispers.com about a week or so prior to earnings. Knowing if a stock is overbought or oversold prior to earnings, combined with analyzing the whisper number and then finally when the earnings result comes out, gives a trader many ways to trade a stock prior and post earnings. For example, if a stock is overbought into earnings, the whisper is below consensus, and the earnings are not good - definitely a very strong candidate to short after earnings.

Keeping in mind that we are in one of the worst bear markets ever, momentum type trades are almost non-existent (some exceptions include AMZN and NFLX). So I would definitely NOT be chasing any strength in this market (yet).

Looking at MON and RIMM, both are reporting earnings next Thursday. Like many stocks, both are over-extended in the short-term.

MON is sitting right around resistance at 87-88, with the 200MA lurking above around 90-91. I believe it is too late to go long here, and the stock is definitely primed for a pullack. I am expecting good results from MON and I believe a close above the resistance levels would push this stock back towards 100.






RIMM gave a warning back in February, and after an unbelievable run in January, dropped like a rock. So, even though the bad numbers might already 'baked' in, the stock is still overbought going into earnings and looks ready for a pullback. It is late to go long here, however, if the stock pulls back to around 40, holds and then cracks 46-47 again after earnings, then look for the gap in early Feb to be closed with a move back to 60.

Update on APOL - will be releasing earnings on Tuesday (thanks Crazycolo1).

Good luck!