5 Simple Steps to Finding Monster Earnings Trades

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Colin Simmons
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1 5 Simple Steps to Finding Monster Earnings Trades Module Two, Lesson 1 IDENTIFICATION Jamie Dlugosch The Earnings Player

Step One: IDENTIFICATION Let's start with identification. This is where it all begins. As I mentioned earlier there are thousands of companies reporting earnings results.

2 Step One: IDENTIFICATION Let's start with identification. This is where it all begins. As I mentioned earlier there are thousands of companies reporting earnings results. Traders need a process for screening potential earnings trades. In order to filter the number of companies reporting earnings, I look at three things, the earnings calendar, the narrative of the market, and whether or not there are momentum stocks reporting results. By looking at those three things then I can significantly narrow down the number of companies that I'm going to analyze for potential earnings trades. But first, when do we trade earnings? Traditionally, earnings season kicks off with Alcoa reporting its results. We call the next six weeks primary earnings season. This is when you're going to be executing the majority of your trades, because that's when most companies are reporting results. But remember though, that good earnings 2

trades can come after primary earnings season thus a potential trade does exist each and every week of the quarter. So how do we know which companies to trade?

3 trades can come after primary earnings season thus a potential trade does exist each and every week of the quarter. So how do we know which companies to trade? For that, I start by looking at the earnings calendar. When trading earnings, we isolate the earnings event. We're focused on the present. We don't want to get too far off into the future. So I'm going to look at the earnings calendar for the week that I'm going to be doing my earnings trading. This will reduce your universe of potential trades from thousands to several hundred, still a lot, because only a few of these are going to be worthy of making a trade. 3

To narrow it down further, I go to the macro headlines of the day.

What are the stories that are moving stocks and producing the greatest volatility?

slowing down. Those are three major stories that move stocks.

4 To narrow it down further, I go to the macro headlines of the day. What is the current narrative of the market? What are the stories that are moving stocks and producing the greatest volatility? For example, today we have rising interest rates, we also have oil prices collapsing, and China's economy is slowing down. Those are three major stories that move stocks. When you're looking for headlines, what you need to focus on is the volatility question, and where can we find that volatility? What story is going to lead to the greatest volatility? Well, any story that brings about uncertainty is going to lead to significant volatility. The same is 4

5 true whenever there is a strong opinion to a headline, doesn't matter what that opinion is, it can be on either side of the equation, it doesn't matter. What we're focused on here are the headlines that create the most volatility. Then finally, any stories where there's a change in the macro environment, that's almost certain to generate lots of volatility, and volatility is a key component of trading earnings. So for example, I'm looking at the earnings calendar for the week of January 18th, and I'm looking at the oil price story in particular. What I want to know is are their any companies reporting that are going to be impacted by the sudden and violent collapse in oil prices that we saw in December? One sector does come to mind, and that's airlines. So when I go to the earnings calendar and I peruse the companies that are reporting in the week that I'm going to be doing my trading, I find Delta Airlines is reporting results on January 19th. 5

Mark down Delta Airlines as a company I want to analyze further. What about rising interest rates? We know that the Federal Reserve increased rates in mid-december.

6 Mark down Delta Airlines as a company I want to analyze further. What about rising interest rates? We know that the Federal Reserve increased rates in mid-december. But that's just the beginning of the story, what companies are going to be impacted by rising interest rates? When I think of rising interest rates, I immediately think about banks and financial institutions. So again, I go to the earnings calendar for the week I'm going to be doing my trading, in this case the week of January 18th, and I look for a bank that's reporting results. There I find Bank of America reporting results on January 19th. Mark Bank of America down as a company I want to analyze further for a trading opportunity. 6

What about China? The economy in China is slowing down. So any business that does sales in China is going to be negatively impacted. That typically means manufacturers here in the US.

China. On Friday, January 22nd, I find General Electric reporting results. Mark down General Electric as a company that I want to analyze further to find an earnings trade.

7 What about China? The economy in China is slowing down. So any business that does sales in China is going to be negatively impacted. That typically means manufacturers here in the US. So again, I go to the earnings calendar for the week I'm doing my earnings trading, the week of January 18th, and I search for manufacturers that may be negatively impacted by the slowdown in China. On Friday, January 22nd, I find General Electric reporting results. Mark down General Electric as a company that I want to analyze further to find an earnings trade. Finally, when I look at that week of January 18th, I want to know if there are any momentum stocks reporting results. A momentum stock is a name that you're very familiar with, it's always in the news, a stock that's heavily 7

traded and where there's often a lot of volatility. So that would be names like Amazon, Chipotle, Facebook, a company like Fitbit, Netflix, or Valiant. Are any of those companies reporting results?

Now momentum stocks produce huge swings in price after results are announced and Netflix is one of the most heavily traded stocks out there.

8 traded and where there's often a lot of volatility. So that would be names like Amazon, Chipotle, Facebook, a company like Fitbit, Netflix, or Valiant. Are any of those companies reporting results? So again, I go to my earnings calendar for the week of January 18th, and I find Netflix. Now momentum stocks produce huge swings in price after results are announced and Netflix is one of the most heavily traded stocks out there. Mark down Netflix as a company I want to analyze further in finding an earnings trade. So in identification we're going to focus on companies releasing earnings in the coming week. We isolate the earnings event, but we don't want to look too far off into the future. We're going to target stocks that are tied to the current market narrative, and mostly we want to find stories that generate lots of volatility. Then we're 8

9 going to look at momentum stocks to identify earnings trading candidates. Once you do that, you will significantly reduce the universe of stocks that you have to analyze in our search for a big gain trading opportunity. Once you do that, we're going to move into the deeper analysis starting with charts. That's coming up in our next video, Lesson 2 "Charts." 9

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10 Traders Reserve Copyright All material in this report is, unless otherwise stated, the property of Traders Reserve, LLC. Copyright and other intellectual property laws protect these materials. Reproduction or retransmission of the materials, in whole or in part, in any manner, without the prior written consent of the copyright holder, is a violation of copyright law. A single copy of the materials available through this course may be made, solely for personal, noncommercial use. Individuals must preserve any copyright or other notices contained in or associated with them. Users may not distribute such copies to others, whether or not in electronic form, whether or not for a charge or other consideration, without prior written consent of the copyright holder of the materials. Contact information for requests for permission to reproduce or distribute materials available through this report is listed below: service@tradersreserve.com 10

Simple Trades, Monster Profits

Simple Trades, Monster Profits Module Four Earnings Trade Examples Jamie Dlugosch The Earnings Player Earnings Trade Examples Now that we've completed our training modules, let's put it all together. We