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        Earnings Season Preview: 23Q3
        Views 22K Contents 69

        Arm Yourself with Knowledge: Seize the Opportunity in Q3 Earnings Season!

        Invest With Cici joined discussion · 07/13/2023 19:44
        The Q3 US stock earnings season is coming after experiencing market retracements in August and September. With the increasing talk of interest rate pause, will the US stock earnings also give investors more confidence? Let’s witness together!Cool Guy
        For retail investors, earnings reports can lead to substantial fluctuations in stock prices. It's crucial to maintain a calm mindset during volatility and employ scientific strategies for implementing stop-loss and take-profit measures. Today, Cici will guide you through three simple steps:
        Step1: Pre-report: Calculate the anticipated price movement to have a clear understanding in advance.
        Step2: Earnings release: Keep track of earnings data to make informed judgments about the market trends.
        Step3: Post-report: Utilize upward and downward trends to make well-informed and scientific decisions.
        Let's go through them one by one!Mess Around

        Step1: Anticipate Moves
        By predicting the movement of the stock price, you can better make a trading plan from the perspective of position profit and loss. There is a common prediction method is: through the option to estimate (just a way, not 100% accurate)
        This method specifically, is the use of at-the-money call and put option prices are added together and then multiplied by 85% to get the range of stock price volatility currently perceived by the market. (The direction is uncertain, that is, the stock price could go up as well as down.)
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        1) Choose the first expiry date after the earnings date.
        2) Look up the option chain and add the price of the at-the-money call option and that of the at-the-money put option.
        3)Then multiply that value by 85% to get the expected moves. You can translate the results into percentage terms by dividing them by the stock's current price.
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        Let's take an example with Tesla$Tesla(TSLA.US)$. They are scheduled to report earnings on July 19, and the closest option expiration date is July 21. Suppose Apple is trading at US$273 two days ahead of its earnings announcement. At this time, the at-the-money call option is priced at US$11.33, and the at-the-money put option is priced at US$11.5, adding up to US$22.83.
        Based on this information, the market estimates Tesla's potential upside and downside until July 21 to be approximately 7.1%. This calculation is done by taking 22.83 multiplied by 0.85 divided by 273, and then multiplying by 100%.
        For investors, understanding the expected volatility can help determine whether to sell the stock before the earnings report or hold onto it for potential profit. By calculating this expected volatility, you can create a better strategy to hedge your risk.Mess Around

        Step2: Focus on Indicators
        When looking at earnings reports, there are a few important indicators to consider. The most crucial ones are Revenue and Net Profit. Revenue shows how much money the company is making, while Net Profit tells us how much money they are actually earning.Chuckle These two numbers help us understand if the company is doing well and if it's worth holding onto or investing in.
        Another important indicator is EPS, which stands for Earnings Per Share. It shows how much profit each share of the company's stock represents. EPS is closely connected to Net Profit and is something investors should pay attention to.
        Different industries and companies may have specific factors that investors focus on for future growth. For example, if a company like NVIDIA$NVIDIA(NVDA.US)$ sees a big increase in chip demand for gaming and data centers in Q2, investors will be interested in how it continues to grow in Q3.🎮🌐
        Also, short-term stock price movements can be influenced by market expectations for the next quarter. If a company exceeds expectations or gives positive guidance for the future, it can have a positive impact on its stock price.Commando
        For more detailed information on how to read financial data, take the premium course Advanced Financial Analysis for US Stock Investing.Wow

        Step3: Implement Strategy
        When earnings reports are released, it can cause the market to become volatile, as mentioned earlier. As investors, we can use some strategies that may help make trading decisions. We can set stop-loss orders to limit potential losses or choose the right time to enter the market.Thinking Face
        If the stock price experiences a significant surge after the earnings report, we can look for a pattern called an "earnings flag." This pattern may occur when the company's earnings report exceeds market expectations, leading to a big increase in the stock price on that day. After reaching its highest point of the flagpole, the stock enters a consolidation phase where it trades within a range. Once it breaks through the upper trend line of this consolidation pattern, it is considered an upward breakthrough. This could be a good time to consider taking action!Cheerlead
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        On the contrary, if the stock price is sluggish leading up to the earnings report and then plummets after the report, it could signal a short-term bearish pattern called "A bad earnings surprise" and may be a sign to consider exiting the market.Flushed
        According to the analysis by Bulkowski, the average decline after the pattern in a bull market is around 13%, while in a bear market, it is around 17%. This gives us an idea of the potential magnitude of price drops during different market conditions.
        Similar to the post-earnings bullish pattern, bearishness should be noted that the stock price on the  day of the earnings release will most likely fluctuate sharply during the trading session, and a few days later there is a close below the lows of the day of the earnings report. CommandoThen it indicates a downward breakout in the stock price.
        Once this pattern is observed, you can consider using target prices for estimating potential further declines, implementing stop-loss orders to limit losses, or potentially entering the market during a rebound if suitable opportunities arise.
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        The above three steps can be reviewed by you guys to get more gains in the Q3 earnings season!Cool Guy

        Finally, attached is Earnings Calendar in Oct., and you can add the earnings reports to your calendar in moomoo- Market- Earnings Reports.
        Arm Yourself with Knowledge: Seize the Opportunity in Q3 Earnings Season!
        Disclaimer: Moomoo Technologies Inc. is providing this content for information and educational use only. Read more
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