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How To Buy Stocks Ahead Of Earnings

Courtesy of David Grandey

NFLX reported earnings this week. There’s no secret that this stock is a leading stock and it was likely to move sharply one way or the other immediately following their earnings announcement.


So do we just blindly buy ahead of earnings and hope for the best? No. It’s all about what the chart is telling us to do and having a game plan where we prepare for the worst and expect the best. Here’s how we analyzed NFLX to make trading decisions prior to the release of their earnings announcement.

When evaluating any trade, you should get familiar with the phrase:


“Prepare For The Worst, Expect The Best”

Prior to the earnings announcement, NFLX was Pulling Back Off Highs (POH) just like in August and down to the 50 day average. This is a bullish chart pattern. This is how the chart looked prior to their earnings announcement after the close on Wednesday:


So what do we do? So there are a few ways to look at it.

We could wait till after earnings and if they slam it we buy at the opening slam on the long side. If they pop it on earnings? We do nothing.

 

OR

We could buy a probing position to be there. Say 50 shares, or half our normal position . If they pop it? We are there and will ring the register on that pop. If they slam it? We buy a full position on the slam of 100 shares.

Options? If you buy calls and they slam it you get wiped out! If you buy puts and they pop it you get wiped out. Thanks anyway not for us.

We were prepared for the worst by having a game plan should the worst occur (slam on announcement) when we said:


“We could buy a probing position to be there. Say half our normal position of 50 shares . If they pop it? We are there and will ring the register on that pop. If they slam it? We buy a full position on the slam of 100 shares.”

So that all said — we took a flyer by buying 50 shares of NFLX at 150.13.

So how did NFLX do after the announcement?

Its Official! — A KOWABUNGA MOMENT.

Netflix pops in after hours and opened Thursday morning at 169.54.

That’s about 19.41 points to those who trade in tandem with us. On 50 shares it’s a gain of $970.50 dollars. Not bad.

And for smaller accounts at 25 share position was worth $485.25!



Bottom line is this — Always have a game plan in the event for when things go against you. That way if they happen? It won’t be such a shock mentally for you as you were prepared in advance, that is unless you are mentally attached.

The way we stay centered is through the mechanics of reality with regards to the stock market. And that is Gain, Wash, Loss.

To learn more, sign up for our free newsletter and receive our free report — “How To Outperform 90% Of Wall Street With Just $500 A Week.”


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