“Concentrate on stocks with proven records of significant earnings growth in each of the last three years plus strong recent quarterly improvements. Don’t accept anything less.” – William J. O’Neil, MarketSmith Founder
But bygones are bygones. The beauty of the stock market lies in the fact that opportunities are plenty; given you have a proven system like CAN SLIM in place. It’s that time of the year when quarterly earnings report by companies for the Q3 year ending 2018, starts pouring in. If stocks report their results better than expected, their prices could move higher. To the contrary, they could drown lower into their Bases, if their reported numbers are worse than expected.
So, how does one play-out this earning season?
Buying a stock during the earnings season, before the earnings are announced, can be good, bad or somewhere in between. In other words, it’s very unpredictable. Firstly, it’s hard to know whether the Company will beat, miss or meet analyst forecasts. And secondly, it may be even more difficult to guess how shares will react to the report. Simply avoid taking new positions in a stock, if its earnings report is due in a week or before.
Your strategy to invest in shares shouldn’t involve any guess work. You need be ready to hold back your card if you think probability could work against you. You are giving volatility the upper hand, if you take a position before a stock’s earnings are due. You should simply avoid it, even at the slightest whiff of risk. After all, growth stocks fall the hardest if they miss their estimates. Below examples show how growth stocks have corrected sharply on missing their expected numbers: