FNSR had earnings today after market close. It tanked 36%, erasing the last 3 months of gains. An analyst said of the 7 most recent quarters of FNSR earnings, 5 had positive post earning price reactions; and the magnitude of this downside reaction is unprecedented. In other words, who would have thought?!
The one thing that sets the stock market from the casinos is that we can use fundamental or technical analysis to increase our odds. Earnings plays are generally 50-50 at best, so why hold a stock through its earning date? We’ve seen it all. Even when earnings beat, a stock could tank; and when earnings disappoint, a stock can pop. We really don’t know how the prices would react to earnings. While one can make a killing, one can get wiped out as well, by the post earnings volatility.
That being said, it takes a lot of discipline to check earnings dates for all of the stocks you own. I am most guilty of it. More often than not, I had no idea when any of my stocks just had an earnings announcement!
Just this year I have had my shares of post earning devastation. Just to name a few: INFN, DAKT,CSTR, …
Now there are trading strategies that prey on earnings volatility via options, but that’s beyond me. There are times, in my humble opinion, one would hold through earnings:
- Long term positions, such as those in the 401K
- Small positions, not enough to cause much pain
- Trapped positions, earning might just turn the position around!
I just had a lucky break with WDC just two days ago as an example for point #3:
It went from big loss to minor profit. I just count my blessings, thank God, and exited. No mood for greed.
Tonight I had another break: AVAV up over 11% to $32 after market on earnings. This one I held because I had a small position, the price has been consolidating for many weeks, and there is a huge thin zone above it. It was worth the risk and it played out for me this time!
Oh, and CPST which I deliberately held through earnings for similar reasons, also broke out this week .
Anyway, be mindful of earnings dates. Here are two earnings links: yahoo and finviz. I prefer finviz because it allows me to filter the list and shows the relevant date (upcoming earning or recent past earnings date).