Do Not Ever Trade A Stock Through Earnings…Ever! | Podcast Episode #25

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Learn to trade stocks successfully. Learn to profit consistently. I’m Ryan Mallory, and on my weekly podcast, I’m going to teach you the ins and outs of a complex, ever-changing stock market. You will learn to trade better, trade smarter, and profit bigger.

0:26
Now, let’s go trade. Hey, everybody. This is Ryan Mallory doing another podcast with you guys here today. And, uh, we’re in the middle of the earnings season right now and stocks are going way up and way down. There’s completely new valuations for some of these companies and the S&P 500 and the Dow 30, and the Russell and the NASDAQ.

0:49
I mean, there’s some massive amounts of volatility. And with, there’s a lot of people losing a lot of money in the, in the stock market right now. And I, I’ve been talking about this on SharePinter.com for ages now. I mean, for at least the, the last decade that I’ve been doing the company.

1:06
Um, I don’t play the earnings. Just, if you, if you’re trading it, don’t, don’t hold through the earnings. Uh, there’s, there’s such a big windfall to the downside that can cost you so much money by trying to hold these things through these earnings reports. And If anything, this past week, we should all be under the notion now that it doesn’t matter how big your company is, it doesn’t matter if you’re Apple, Google, Facebook, Amazon, Netflix, Twitter, um, General Electric, uh, Chevron, it doesn’t matter what company you are.

1:42
You can get destroyed in your earnings report. So if you’re holding long. You can absolutely see a 25% reduction in your position value within a matter of minutes or hours because we saw that with Facebook this past week.

1:58
Facebook had a valuation over 100 or $600 billion 600 billion dollars, and within a couple of hours, over $120 billion was wiped out just like that and. I got a lot of text messages about this.

2:15
I got some from family that played the earnings. I don’t know why, but they did. And I got it from friends that they, they thought that the stop losses were somehow going to protect them. Like if they put it at, let’s say $195 they thought even if it opened up at $180 that, that the market would still somehow honor that.

2:39
No, I mean, here’s the thing about stop losses. If you put in a stop loss of $195 and you hold it overnight and the stock opens at $180. You’re not going to get out any higher than $180 a share, um, if that stop loss is still active.

2:56
So, The reason why is because you have to have a. person willing to buy it at $195 in order for that stop loss to get executed. People, people lose track of that a lot of times and a lot of times it’s just because they’re so new to the market.

3:11
They don’t realize that. It’s another person buying the stock from you when you’re selling it. It’s not like a system that just says, OK, we’ll just put this, these shares back into a pool for somebody else to buy later. No, it has to be another buyer that’s taken the shares from you, and a lot of people just missed that fact.

3:27
They think that if they put a stop loss there, it doesn’t matter what the stock does, they’re going to, uh, get that honored. If that was the case, the, the earnings would be the greatest risk reward opportunity. There is.

3:44
It would be the, the one thing to where you could set a stop loss guarantee that you’re going to get out of that. And if the stock goes way up the next day. It’s going to be unbelievable.

4:04
In fact, what I would do if I was, if I was holding, uh, if that was the case where you could get out at the exact place where you placed the stop off at, I would put it 10 cents below whatever it closed at that day, and then, To see where the earnings, earnings season takes you thereafter.

4:20
I mean, that’s, that’s kind of like the foolhardy belief that people are trading with that if. If the earnings doesn’t go your way, somehow that stop loss is still gonna be honored.

4:42
No, somebody has to buy those shares from you. And if it’s opening up at $180 good luck at trying to find somebody that’s gonna buy it at $195.

4:57
So, Don’t, don’t expect stop losses to save you when it comes to earnings. So this is why I don’t play earnings. I don’t play them at all.

5:07
I didn’t play Facebook. I don’t play Apple. I don’t play Google or Twitter, and thank God. Thank God I don’t because you know what, there’s a lot of people that are having to pick up the pieces after, after the, the, the earnings season, um, right now.

5:25
And there’s gonna be more in the week ahead because there’s a lot of companies coming out. I don’t know what Apple’s going to do. I don’t know what a lot of these companies are going to do.

5:43
I had a stock that I sold, I believe, kind of for like a slight profit, not much, but I think it was like around $423 or $424 a share was, uh, the stock symbol was ABMD, that’s, uh, apple, berry. Mary Berry. But, uh, that might have made it worse.

6:00
But in any case, though, ABMD it was a medical device company and I didn’t make much off of it and everything, and that’s OK.

6:19
But if I would have said, you know what, I didn’t make anything off of it, I’m gonna hold it through earnings. Well, that thing went like sub $400.

6:40
I mean, it went way down. I think it might have hit like $380 or $370 range.

6:57
Another good reason. Then you have Twitter, OK? A lot of people are probably thinking, well, Twitter just got hammered by Facebook and Trump tweeting out something.

7:15
OK, it’s got to go up now and it’s going to be the one that shines. No, it got hammered too. I think it went down at 1 point over 20%.

7:32
Guys, if there’s one thing that I could tell you, don’t play the earnings. It’s just not worth it.

7:45
Let’s say, um. Let’s say Apple has a fantastic earnings report on Tuesday, OK? Or Wednesday, I think it’s Wednesday that they report.

8:01
Let’s, let’s say they have a fantastic earnings report. What are you really expecting to the upside?

8:18
I mean, are you really expecting, uh, 10 or 15%? No, not really.

8:34
I, I, I’m not. I would say maybe, uh, 4 to 5% is the best-case scenario.

8:52
It just, well, I mean, you just don’t see the big earnings pops anymore out of that company.

9:09
I mean, the company’s almost $1 trillion OK?

9:33
I mean, for a stock to move 5%, I mean, it has to have $50 billion worth of reason to move up, uh, 5%.

9:50
So, uh, I, I don’t see it.

10:12
quarter two doesn’t tend to be the best thing in the world either, but if they blow it Zuckerberg style, right?

10:30
And, uh, if they, if they vote Zuckerberg style, and they’re going down 25%, OK, that’s the, let’s say that’s the two possible scenarios there.

10:53
And of course, there’s a lot of in-betweens, but there’s a bigger chance that it could do something crazy like what we just saw with Facebook than it is to do the same to the upside.

11:11
Um, But if it goes down like that much, then you’re only playing something with like a, a, a 1 to 5, uh, reward to risk ratio there.

11:27
I mean, that’s the exact opposite of what you’re wanting when you’re trading.

11:43
You want like a 5 to 1 reward to risk ratio, not a 1 to 5.

12:00
So it’s not there. Earnings. You can’t predict it.

12:21
I, the reason why I don’t do it, it’s not because I came up with this idea on my own. No, experience taught me not to play earnings.

12:27
When I was very young and just starting out in the business, I would play the earnings. I would play biotech earnings, and that was a bad move.

12:43
I would play the small caps and that was a bad move.

12:51
And then I tried, well, maybe I need to play with some big caps or large caps. Nope, that was a bad move too.

13:00
And I’m out of that business. I don’t do earnings at all.

13:07
I think it’s a, a foolhardy approach to trying to win successfully.

13:15
You’re just doing a red or black move there in a Las Vegas casino, and that’s no way to succeed in the stock market.

13:27
So, that said, I’m gonna wrap up this podcast.

13:32
I’m glad that you listened.

13:36
Don’t play earnings, OK?

13:40
Take care.

13:43
Thanks for listening to this week’s podcast of Swing trading with Ryan Mallory.

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All the best to you and God bless.