An Earnings Disaster | Podcast Episode #330

0:07
Hey, I’m Ryan Mallory and this is my swing trading the stock market podcast. I’m here to teach you how to trade in a complex ever-changing, world of Finance, learn what it means to trade, profitably and consistently managing risk, avoiding the pitfalls of trading. And most importantly, to let those winners run wild, you can succeed at the stock market and I’m ready to show you how, hey, everybody, this is Ryan Mallory with Swing Trading the Stock Market and today’s Sewed is going to be about an earnings disaster.

0:39
This email here, this is actually a repeating writer. So I’m always appreciative of those who write the show a second time wanting to get my pant, makes me think that, hey, maybe, I gave some decent advice on the first one, not Financial advice. Do your due diligence, talk to your financial advisor, that whole disclaimer, again, not a financial advisor but I do like to give my opinion on things and I encourage everybody to write into the podcast show itself.

1:05
Then I make episodes out of it. It’s really a cool thing that we have going on there because I’ve been able to learn so much about you guys your stories, where you come from the struggles and it’s helped me as a traitor. You guys have provided me with insights and ideas that I’ve never thought of before, and I’ve been able to apply to my own trading as well.

1:23
So for this podcast, episode decided to have myself a nice glass of Weller Special Reserve, that’s about 45% alcohol. 90 Proof good stuff there. Actually it comes from Pappy’s. The way I understood Weller’s was is that it’s actually the same recipe that they use for Pappy’s, except it’s kind of like the rejects.

1:41
It’s like that Seinfeld episode with the cardigan, I guess is what it was that sweater, that George Costanza was trying to buy for his girlfriend or the girl that he was interested in. But it had a red dot on it, that made it a much cheaper or a discounted article of clothing. So, that’s kind of what Weller is it’s that cardigan with the no, it’s cashmere.

2:01
Is that what it is? Yeah, it’s a cashmere. It’s a cashmere sweater that George Costanza. I had bought for his girlfriend, and I had a red dot on it. So he got it at a discount. That’s kind of what weather is. I think you can buy it like $22 or something. If you go to ABC, it’s pretty popular there. Be kind of hard to get, but if you can get it, it’s definitely worth 20 bucks.

2:19
So I’m going to read the email, he writes, dear Ryan. He says I have written to you in the past. The name you gave me was the judge. So feel free to use that again. Should this make it on the podcast? I just had a trade go very badly and I wanted to get your thoughts on it. I have a full-time job and just got into swing trading in February.

2:35
Of this year, I’m a member of the SharePlanner trading block and make a lot of my trading decisions, based on the information off of there. I don’t get as much time during the day to dedicate to trading as I would like. So, I Rely heavily on your research while I am learning. So far this year, I have had several losing trades and very few winners.

2:52
However, I keep my stop losses, pretty tight because I know I am just learning in this market, really sucks. It does. If really sucks bad, he goes on to write. I’d trade relatively a small account in the hopes that I can learn enough to. So a consistent gain, I will start adding capital and the future.

3:10
My trade will usually be about 10 to 15 percent of my account. If I’m feeling really cocky I’ll throw a little bit more at the trade but I never go Beyond 20% of my Capital. So here’s the scenario around April 13th I bought in to see hgg that is check for those who don’t know, it’s a consumer defensive stock, it’s in the educational Training Services industry.

3:29
He bought it around 1775, it seemed to find support on the year. It slows. And from what I had seen had not Fallen below 1525 in the past three years, I was hoping to play a bounce off of the lows while at hopefully filled the Gap from February. So again, I’m not trying to get too crazy on the charts because I know you guys are just listening to it, but there is a gap on the check chart back in February, that goes from around $18 up to 21.

3:54
So that’s what he was hoping to see this stock. Do it would fill this Gap from that time period. On April 20th, I sold one third of the position for a better than 10% profit. That’s really good. My Hope was that Would ride to around $19. Sell another third and then let the remaining third go wherever it would.

4:11
My stop loss on Chegg was set at 1728. My stop losses are generally good to cancelled or GTC because I don’t have the time in the mornings to set them for the day, but I will adjust them as necessary when I have a chance during the day. And after hours, usually I will tighten them up during the day and then lower them.

4:29
After hours to try to avoid getting stopped out in the first half hour of Attila T, that’s interesting. I don’t know too many people that you stop losses, after hours. That’s actually very dangerous and we’ll talk to you about that in a second.

4:47
Next paragraph. He says, last night and after hours, so he’s he sent me this email on May 2nd. Check had this massive gap down if I remember, right? I think chug was getting really hurt by the fact that people are using Ai and not their products or they were being impacted really negatively by AI products causing the stock to go from like eighteen percent down to 9%. I’m not laughing at. It’s just just some of the crazy moves that you see in the market these days. These are just really breathtaking. So, again, he says last night and after hours, Check fell to $10.40 because it was after hours of blew, right through my stop loss, but did not trigger it. I saw it around 9 p.m. and after about 20 minutes of pacing, the living room decided that there was nothing that I could do about it until the morning minutes before the market opened this morning.

5:25
It had fallen to 925 at that point. I knew that when it opened, I would be stopped out at a forty seven percent loss or so. I dropped my stop-loss 2915, I decided that it was a losing Trade anyways, and I needed out but if it went up intraday, I thought maybe I can mitigate my damages, a little over the next couple of days.

5:41
Before I got out minutes after it opened it, dropped down to 863, and I was topped out at a more than a 50% loss on the tree. My question is, are there steps that I can take to protect them myself from these after our curve balls, like that? Or is that just the nature of the Beast?

5:56
I am on thinkorswim and I do not have after hours privileges. I’m assuming that it’s because my account is not big enough. Now, Chegg is going back up, but I’m not interested in chasing it because that seems like Revenge trading, which will just end up adding insult to injury at this point.

6:12
Thanks for your time and support, sincerely, the judge. Now, the heavy email a lot going on there with his debacle there. And yeah, it had as massive sell-off and then a trolley back just a little bit and then it’s sold off again today.

6:28
And when I’m speaking of today, I’m talking about the give you the exact date. Here it is, May 4th. So, That’s when I’m recording this podcast and the evening of May 4th.

6:44
So, one of the big things and the title of this podcast is an earnings disaster. He doesn’t actually mention the fact that it was an earnings report that came out. So it makes me wonder, does he even know that? The reason why it drops so much was because of earnings and being a member of the trading block actually have rules posted in the trading block that says, I will not hold stocks through earnings.

7:01
One of the interesting things about Chegg is that this was a stock that I was Back in early April and he got in on it around April 13th. So if we’re looking at April 13th, yeah, that’s when it broke out. So it was a good trade that he got into, he got into it on the break out and then a trolley for a couple days and then it pulled back to that breakout level at around 1730 and then took off and then just traded sideways for a couple days.

7:26
But one of the biggest things with trading is you got to know when these earnings reports are going to happen, I will not hold a swing trade through earnings under any Stance and is for the very reasons what you just saw a check. Now do I expect that Apple, whatever, you know, have a 50% having of their stock price, not necessarily I’d, I wouldn’t expect it.

7:46
They just reported earnings today and they had like a 1% 2% reaction to the upside on it. I think it would take a lot for Apple to be cut in half or even Amazon, or, or some of those other big ones, the Chegg as a very volatile stock in general and to it’s not an apple.

8:01
And so yeah, it is a lot more susceptible than what the maybe you’d see. Of the big tech stocks, big thing tech stocks where there’s a lot more market capitalization there. But check it is very possible for it to have these 50%, is that normal? Not at all, but it is possible. I’ve seen Facebook dropped, 20 plus percent before seen it multiple times.

8:20
So I think that’s the biggest are that this guy just made the judge here. He got into Chegg. That was okay, that wasn’t the air but holding it through. Earnings was the air. It was a bad earnings report. It had that news. I remember seeing it about they’re not doing Well, with the whole AI environment right now and so investors Panic, they got out of it.

8:40
One of the other things that I found kind of fascinating was the fact that he is using stop losses after hours, I don’t ever use stop losses after hours. I don’t even think I’ve attempted to try to use stop losses. After hours, is there risk to holding a stock overnight? Yeah, I mean, what if check came out and they didn’t save it for earnings. What if they just came out and said, hey, we’re being negatively impacted by the whole AI?

9:00
It probably would have had a significant sell-off. Still maybe would have been 20 or 30. Without insight into the earnings but that still, that would have been awful scenario. But that’s also why I say don’t get too confident in your trades. Always assume that they’re going to go bad on you.

9:16
And yes, there is the potential for significant news events to impact the stock. I’ve probably traded check before in the past, I can’t recall for sure if I have, but I do take into account the volatility in the headline risk. Associated with stocks, check does have a little bit of headline risk to it but I wouldn’t say May it be enough to never trade it.

9:37
In fact, this was an easily avoidable lost right here by simply keeping track of when a stock is reporting earnings.

9:54
Now, for me, I always have my stocks that I’m watching in a watch list on my TC 2000 software. That’s the software that I use, primarily, I have others, I have tradingview, and I stock charts. Some of those other ones I have Trend spider to which I got to get a little bit more familiar with because I know they got a lot of cool features on Trend spider. but in terms of watch list management, I use TC 2000 and TC 2000 has a option that you can add to your watch list is of when the next earnings report is and I can’t stress enough how important that is because each week I go and look at my watch list and I go ahead and just take out the next two weeks of stocks out of my watches I don’t care how much I like the trade setups that don’t even look at the symbols I sort by the earnings reports that are coming up the soonest and if it falls within a two-week period So right now today is May 4th if I was sorting it by today, I would essentially say between now and May 17th.

10:39
I do not want a single stock that reporting earnings in my watch list because for one I don’t want it to sneak up on me and then to I don’t want to get too like May 12. And I’m looking at this train is like, hey, it’s really nice trade but it has earnings on May 17th and I forget to check it or something crazy like that.

10:57
And then, all of a sudden, I’m holding a stock that only has about two days before reports earnings. The following week. So, for about two weeks, I want all the stocks out. And so I always have this running two weeks removal in every weekly update that I do to my watch list. Now, I add stocks in my watch list all the time.

11:13
I’m always going through scans and everything, but once a week, usually, Monday, morning Sunday night. I go through those lists. And I go ahead and act every stock that’s reporting earnings over the course of the next two weeks in that keeps me out of situations like check because Chegg was on my watch list for a while.

11:31
They’re especially during the month of April. But once we were starting to get close to that earnings report, that little sorting feature would have taken check right out of my list in it did another thing that you should be aware of is swingtradingthestockmarket.com I plug this in every podcast, but for good reason, you’re getting all my stock market research for pretty much Pennies on a dollar.

11:51
Right is really, really good market research. You’re getting all of my watch list, my bullish and bearish. Watchlist my master updates each week plus Daily. Watch lists. You’re getting updates on the big tech stocks. You’re getting videos on some intriguing ideas and trade scenarios.

12:09
Plus, you are getting Market updates. So big Tech updates. Mark it updates, it’s really good stuff. You’re supporting the podcast in the process. If it’s been a blessing to you definitely check out swingtradingthestockmarket.com, because I think that will be a blessing for you as well. Good community of Traders there that are benefiting from that.

12:25
So, check that out. swingtradingthestockmarket.com. Now that I’m done with that plug, you’re still a lot to discuss. About the judge is email here. So using after our stops, I don’t even know if you can play stops after hours Kenya. I’ve never done it before and it’s, I’ve never thought about doing it before.

12:44
I’m going to look this up because I have my doubts. Can you place stops after hours? Stop? Okay, so this is what I’m using the Bing search engine. I hate being but whatever. It says, stop orders. Typically do not execute during extended hours and he even said hear it.

13:01
Didn’t execute, I thought it didn’t stop and trailing stop orders you place during extended hours usually Q4 the market during the opening on the next day, orders created, during regular training sessions. Do not get executed in extended training sessions and I don’t think you can. I could be wrong on this, but I don’t think you can mark it for after-hours only either it the reason why and I think that’s why he didn’t get stopped out.

13:20
I’ve seen people in the past and this is kind of crazy to that they will. Let’s say they get it ABC example. Here again, the stock ABC at 100 and they put a stop loss. D5. I’ve seen these people on stocked with before and they’ll hold a stock through earnings in the stock, all of a sudden be trading at $60, a share and they will post on there as I am.

13:41
I got nothing to worry about I put my stop loss good to cancel at $95, so I’ll just get filled at $95 tomorrow’s like how is that going to happen if it’s trading at 60? They don’t realize that what guides the market is supply and demand. So if there’s not somebody willing to buy it at $95, you’re not going to get filled at 90.

14:01
Five dollars. And so if it’s trading at 60, the next day in the, that’s where the bid and the ask price is there’s no chance of you getting filled at 95, at that moment in time. Maybe if it goes from red to Green, you could have it. But at that particular moment of time, no, you’re not getting filled and I’m not picking on you if you thought that that was true but it’s a very new b-type assumption that some Traders will make it.

14:23
Stop losses can get blown through if there’s a significant overnight event like check what we’re talking about here with ch GG goes from like, Teen all the way down to the eight the next day. That’s massive. But if you had your stop loss at 16 doesn’t matter, you’re just going to get filled at 8:00 the next day because that’s where the buyers and sellers are at, they’re not as so, I don’t use after our stop loss is, I’m not saying that.

14:46
There’s not a scenario for certain traders to get out of a stock in after hours, for me. I never do it. Even if there’s bad news. I just wait till the next day. But one of the things that I do is that I don’t hold a stock through its earnings report, which does happen after, Hours, or before the Market opens, which can create some massive amounts of volatility that can put you in a real bad buying like check did met is another perfect example.

15:09
I would never hold Meadow over its earnings report, just the craziest thing that I could possibly do. He also uses good to cancel orders. I get it. Like everybody has different Lifestyles. I prefer to put my orders in each morning and to not leave it to a good to cancel order because oftentimes, you can have some real weird.

15:27
Bid ask prices in the morning and oftentimes your stop losses unless you otherwise Stated specifically in the order will be triggered off of what the bid and ask prices. So if that triggers the stop-loss, it may not even have an ordered that sells down at that level, but because the bid and ask price is below your stop loss, it will trigger it in a split second that bid and ask price might go right back up to above your stop loss, but it was just there for a split moment in time.

15:54
It’ll trigger it in a market order you out of the trade. Now fought him for this, he did not go chasing after the next day, it started to Rally. It goes from The nines or hi-8 and gets all the way up to back to 11. And he didn’t chase after, and that’s good because the day it was down another 7%.

16:10
It had a good rally, but it dropped back down and now it’s trading at 950 again. And so that would have added a lot of insult to injury. Like what he just said, because here’s the thing, if you lose big on a trade and it’s going to happen, it’s probably some point. That’s why I don’t believe that.

16:25
Everything should be your heart and soul should be put into one trade, your Capital, your hard-earned money going 100% long. I don’t like that kind of stuff. I do about 12 percent on each one of my trades and that’s where emotionally and mentally I can handle the volatility in a trade.

16:42
And if I do have a bad trade, okay, let’s say I was in this check situation, it wasn’t learning space, they came out with something that caused the stock to drop 50 percent overnight. Would it be sickening? Would it hurt? Yes. It would. It would just not my stomach knowing that I just took a massive loss on something.

16:58
I couldn’t do anything about but I would be taken somewhere between like a five. And 6% hit to the portfolio. Is that something I can recover from? Absolutely. But if I go 60 or 70% on the tray, let’s say I put 70% of my capital on the trade and I took a 35 percent loss. Am I coming back from that anytime soon? Now, so the position Size Matters as well to unexpected and Unfortunate Events because they do happen and I’ve been blessed.

17:14
I haven’t had a lot of real bad ones in my past at least not if, you know, recent memory when I was younger my trading. Yes. I had some pretty bad experiences, but as I’ve kind of become a little bit more wise, A more mature. My trading I have not had those things happen, I don’t have to knock on wood for that either. I just just say no fact that you know I think I’ve had some surprises before but nothing that was detrimental.

17:32
So any case one of the things he didn’t chase after it that’s good because he realized that there will be other traits. Nobody other traits that you can make some of that money back from that you can recover from. It doesn’t have to come back from check. Like why does it have to be from check? If you lose 50% of the trait, the last place I’d want to go to is the place that I just lost 50% from, I’d rather go to something.

17:48
That’s He’s actually doing pretty well that has a better trade setup is definitely not with check right now, but there’s maybe there’s something mentally, where we feel like that we have to get the money back from the trade that we lost it from. It’s like the person who date’s, somebody thinking that they’re going to change them. It’s like we’re getting back into the stock think that we can change that stock that we can make it a better trade that we can justify. Why we got into it early on. No, just move on to the next trade.

18:14
This Weller’s is really good by the way, I enjoy every step of that stuff especially for the price. 20 bucks. I’ve noticed a lot of times at ABC, they like to keep it behind the counter. So if you don’t see it on the show’s, ask them. And then finally, we’ll wrap it up with this. There was one sentence here and it was its own little paragraph. He says, my typical trade will be around 10 to 15% of my account. If I’m feeling really cocky, I’ll throw more of the trade but I’d never go Beyond 20% of my Capital.

18:49
I may be splitting hairs here but if he typically goes like 10% of his capital on a trading then if he’s feeling cocky goes at 20% you are doubling your risk on that. You are doubling your closure to your capital and what if you’re feeling cocky on check and you want 20%? And then you lost 50%, then you own. It’s basically like losing an entire position on that trade because think about it if you put 20% on the trade you lose 50% then you just lost 10% of your portfolio on that trade because you were feeling good.

19:16
Instead of if you were put in five temper, if you were planning 10% on your trade, you would only be losing 5% which is a much different scenario. So I would tell the judge here, try to view each trade as just. Another trade, not as something special, not something to be Sided or cocky about just viewed as another trade.

19:35
It’s just another trait as a traitor. And as a successful Trader, you’re going to have many, many traits, winning trades, losing trades along the way throughout the course of the year. Just treat them all the same. If you enjoyed this podcast episode, I would encourage you to leave me a five star review, man.

19:51
Guys, I feed off of those things, they really do mean. A lot of this shows been a blessing to you over the years. This is like number 330. I would encourage you to leave a five star review, tell me about that because it Does it encourages me? Because you do this many podcast episodes. Sometimes it can feel like they’re running together.

20:08
You don’t know if people are still listening or if they still care about it hearing your reviews. It does mean a lot to me, I share them with my wife, she gets a kick out of them. I do too. So do that for me I would really appreciate it in. Check out swingtradingthestockmarket.com, leave me some emails, send me some emails.

20:24
ryan@shareplanner.com I read them. I try to put all of them into their own podcast episode here. So keep sending Your emails if I have not done it episode with one of your emails, sometimes you guys like to send me tax questions, I don’t really know much about taxes.

20:41
So I kind of avoid those because I just I have an accountant for that. So send me your emails ryan@shareplanner.com, I love to hear from you guys. Thank you and God bless.

20:58
Thanks for listening to my podcast. Swing trading the stock market. I like to encourage you to join me in this SharePlanner trading block, where I navigate the stock market each day. A with Traders from around the world with your membership. You will get a 7-Day trial and access to my trading room including alerts via text email and WhatsApp.

21:19
So go ahead sign up by going to shareplanner.com trading block, that’s www.shareplanner.com/trading-block. And follow me on SharePlanners, Twitter and Instagram and Facebook where I provide unique market and trading information. Every day you have any questions, please feel free to email me at ryan@shareplanner.com all the best. To you. And I look forward to trading with you soon.