How to Swing Trade Earnings Reports | Podcast Episode #339

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.

0:33
In today’s episode, we’re going to talk about earnings reports. Here. What is its impact on the stocks? What can we expect from earning season? That’s coming up right around the corner at the end of June, the first half of the year is over, the second quarters or so, then you’ll start seeing about a few weeks later after that a lot of stock starting to report earnings.

0:49
Usually, the one month after a quarter, end the week before and the week after, that’s where you get the Lion’s Share of your earnings. That’s where you see a lot of your big tech stocks report as well. So, today’s email was going to come from a guy. He wants to be called Neil. I don’t like to use people’s real names unless they really beg me to. But, You’ll rates he says, Hey right.

1:07
I recently found your podcast and love the Simplicity and direct approach. My question to you is can you talk about earnings reports and how it affects the stock? Well, if you think my shows, you know, pretty simple and direct, I love that. That’s really what I’m trying to accomplish. But I also say that your questions pretty simple and direct and I like that as well.

1:25
So thank you for that. Neal also lets me know that he’s a big whiskey Drinker himself and he loves that part of the pockets. I haven’t done a lot about the whiskey, but for your sake, today’s podcast episode Drinkin Bond Stone. A see if I can get this, right? Yeah. Bonds, Stone, Cask strength.

1:40
This stuff is good at a friend. Bring it over man. This stuff really hits. It’s like 61.4% alcohol 122 point but 8 proof this stuff is the real deal. It’s solid. You got a lot of good. Smells to it man. When you can you smell it man you pick up a lot of flavors that cinnamon the vanilla the honey same flavors.

2:00
When you tasted that comes on with a really strong finish though. Cask strength, I’d probably give. Like 82 83 83, will City three really good bourbon? That was for uni life. Since you like that part of the podcast, one to throw a quick review in there for you, man. I ended up spilling this thing everywhere.

2:17
Hey, hold it up to the camera there. So I got bourbon everywhere now, all over my keyboard, but whatever.

2:34
All right, so earnings reports, like I said, they’re four times a year every three months. I consider it one of the most volatile and unpredictable moments for the stock market, for specific stocks alone. A lot of times you’ll see me trade some ETFs during that time instead of trading individual stocks, particularly if that stock has an earnings report that’s coming up in the next week or two. Because, especially when it’s a week out, what are you really going to accomplish with a swing trade? Yes, you can day trade it all the way up until that point.

2:50
But from a swing trading standpoint, if you’re only going to give yourself one week’s time to trade that stock because you’re not going to hold it through earnings, and that’s one of my major, major rules, I do not hold a stock through earnings, nor will I ever. Earnings is too unpredictable and we’ll get into more about why it’s so unpredictable in just a second. But because you can’t predict the outcome and it doesn’t matter if it’s Apple or if it’s Lucid or Rivian, it’s going to be unpredictable. Yes, I’d rather hold Apple into earnings than Rivian.

3:20
But the commonality between the two is that they’re very unpredictable. Some are more unpredictable than others. Nonetheless, there’s too much unpredictability with all the earnings to want to hold any of them through those earnings reports. And probably the funny thing is that most people don’t understand the fact that they should not be holding a swing trade through earnings.

3:38
And why is that? Because they haven’t experienced the pain. Once they experience the pain, once they go through it a couple times, they start to realize, probably not going to swing trade through earnings. They start hearing my podcast and it’s like, man, Ryan actually knows what he’s talking about on these earnings, they’re really unpredictable. And it’s true. You usually don’t understand the gravity behind the earnings reports until it’s too late.

4:00
If you get lucky on a few and they go up, then you’re starting to feel confident, like you know how to pick the earnings reports. Let me be frank with you, you don’t know diddly squat when it comes to earnings reports and how the market’s going to react to them, and you don’t know them ahead of time. If you know them ahead of time, then you’re dealing with insider information, that’s illegal.

4:16
So you can’t do that either. When it comes to earnings, there’s the analyst expectations. There are analysts from all the different banks, whether it’s JPMorgan, Bank of America, Citigroup, Goldman Sachs. And then you’ve got a whole bunch of others that you’ve never heard of. You have Merrill Lynch, not that you never heard of that, or Smith Barney. There’s just tons of them.

4:34
I know some of them actually merged over the years, and I’m probably repeating some of them that may have already been merged with somebody else. But nonetheless, there’s tons of expectations. And then there’s a consensus number, what they think that the earnings report will come in from a revenue standpoint and from an earnings per share standpoint. Then the company reports the revenue and they report their earnings per share.

4:54
Then there is a market reaction based off of whether or not they exceeded their earnings per share or they exceeded the revenue per share or they exceeded both of them. And they talk about on the top and bottom line, they talk about all these little fancy cliches and different expressions.

5:11
But nonetheless, did they beat on earnings? Did they beat on revenue? And then there’s a market reaction. Now, what’s crazy about that is you hear about things like there’s a whisper number out there. And I don’t know, some people say there’s like an earnings whisper number out there. I don’t really know if that’s true or not.

5:27
I’m not really privy to that information. Nobody really tells me what a whisper number is if one actually exists. And I don’t trade through earnings, so what does it even matter to me? And let me tell you, I sleep a whole lot better at night not having to worry about earnings reports. So they beat or they miss on earnings and revenue.

5:44
And then there’s the market reaction. But then there’s the conference call. That’s where people can dial in, they can ask questions, and analysts start to ask them like right now everybody wants to know, what are you doing in order to capitalize on AI? Or back in the 90s, what are you doing to capitalize on dot com? Do you have yourself a website yet with a dot com at the end of it? That’s the kind of questions they were asking back in the 90s, and depending on their answer, the stock would soar even more.

6:16
You saw it in the last earnings reports. I remember Google and Amazon, all these ones. The more they said AI, the more the stock rallied. If they didn’t say AI, the stock didn’t rally.

6:32
So then you have these themes during the conference calls that the analysts are interested in. There was a time where it was about the metaverse, and before that it was about Web3, and before that it was about Bitcoin or NFTs. And the analysts, they’re like hyperventilating over this stuff.

6:48
Let me continue to be frank with you, and there are probably only some analysts that listen to this podcast, most of your analysts are not that smart. They’re just good old boys that are just toeing the company line. I know some of them. I’ve met some of them over the years. I’ve never been really impressed by any of them.

7:05
In fact, you’d be shocked, but some of you guys know more than what the analysts know about the stocks that they’re analyzing. I met a guy one time, and he was an analyst for this one big firm. He did their restaurants. I think I was in Shake Shack on a swing trade that was going really good. And then the dude downgraded my stock, and I saw him at a funeral years later.

7:25
I asked him, I was like, dude, what did you downgrade that stock for? And he couldn’t really tell me what he did. He didn’t even know. He didn’t even know that he actually downgraded it at one point. That’s how crazy it was. But he did. He stopped me out of a trade because of that stupid downgrade.

7:45
And I don’t know, maybe I haven’t even forgiven him for it. Who knows? I have forgiven him for it, but it still leaves me a little bit bitter. He didn’t have to do that to me. But in any case, you have the company guidance. And that company guidance going forward will tell you what they project revenue is like. You saw Nvidia in their last earnings report. They came out and they said, oh, we expect instead of like seven billion dollars next quarter, we’re projecting eleven billion. And the stock went crazy.

8:09
Like absolutely crazy. And so then that actually inspires a lot of people, especially if they were holding it through earnings and they made that money off Nvidia and that crazy run that it made thereafter and is still making. They continue to do that kind of stuff.

8:26
I always talk about it. It’s like having a serial killer mindset. What do serial killers do? They keep killing until they get caught. And so with earnings, people will keep trading earnings until they get destroyed. And that’s just a sad fact, and it’s usually just one that it takes to destroy them.

8:46
Guidance is going to be important, like what we were talking about with Nvidia. And sometimes they’ll warn about their guidance and they’ll say, hey, we don’t think that we’re going to have a good quarter coming up, and then the stock plummets. But what really gets a lot of people in it, and it probably is what gets Neil here and the reason why he’s emailing me about this particular question, is that he’s probably been in stocks before that had a really good earnings report. They beat on the earnings per share, they beat on the revenue, and the stock plummeted.

9:01
You’re like, what the heck? They even raised guidance and freaking A, you still lose on it. You’re like, what the heck? And why is that? And that’s the mystery of earnings. They talk about it’s like a whisper number or whatever like what we were just talking about earlier, but in reality, earnings can be very flaky. It can be that it had a huge run-up into earnings, it was priced for perfection, and it’ll blow the analysts out of the water, so they hit the sell button because they already had a ton of profits as it was. That can be the case.

9:20
Sometimes you have an earnings report that comes in really weak and you’re thinking, man, this thing is going to go down, short on the earnings, and instead it goes down for a little bit and all of a sudden a whole wave of buyers comes in and it just snowballs into higher prices and all of a sudden you’re back in the green and you’re losing money like crazy.

9:38
So again, why I don’t trade earnings is because it’s such an unpredictable event. You can say to yourself, well, I’m just going to trade Meta earnings, or I’m just going to trade Amazon or Apple. But guess what? There’s a lot of those that had some horrible earnings reports back in 2022. You take Meta.

9:54
It’s rallied like one hundred and fifty percent or so off of the November October lows of last year. It’s still not filled the gaps from the earnings reports that you saw back in February 2022. You take Amazon and it has rallied sixty percent off of its lows or give or take a few percent and it still hasn’t recovered the losses from the May 2022 earnings report.

10:16
It’s still trying to make up for those losses. Or take PayPal. The stock right now could double in price and it still wouldn’t have recovered from some of the losses that it had incurred from its earnings reports that go back to February of last year.

10:33
The point being is that you make a trade and you hold it through earnings reports as a swing trade, it may define your year in a very, very bad way. It may define your trading career in a very, very bad way depending on how leveraged you are on that particular trade. If you’re going into it like fifty or sixty percent of your capital and the stock plummets forty or fifty percent from earnings, you’re screwed.

10:50
Now some people will ask, well Ryan, how do you do long-term investing when there’s earnings reports out there? Long-term investing is much different than swing trading. Long-term investing, in order to do long-term investing you have to hold through earnings reports. Now one of the things that I do in my own long-term is I wait for incredible values. You’re not going to see me buying Google at its current price or Amazon or Apple at all-time highs or Nvidia at all-time highs, because I don’t think that they’re worthy of long-term investments at the current price.

11:17
But if you give me Apple drops fifty percent or forty percent, I’m probably going to be interested in buying some shares of Apple. But I need to be getting it at a bargain price. And yes, when it comes to long-term investing, I spread myself out quite a bit because I do not want a heavy emphasis on one particular stock to where if there is a really bad earnings report, I’m going to get slaughtered from it. But this is about swing trading the stock market, not long-term investing. Long-term investing, in order for it to be a long-term investment of more than one year, you got to hold it through earnings. Swing trading, you don’t want to do that because one trade can define everything for you.

11:53
In a very negative way. We talked about how it’s taken over a year for Meta to make some of its gains back. But from a long-term perspective, that might just be a little bit of a blip on the radar. But for swing trading, that’s the worst possible thing that could happen. By not planning for your trades, not planning for the risk, and not avoiding the earnings reports, then all of a sudden you’re stuck in a trade hoping that you can get back to break even at some point down the road. But one thing that’s better than being break even on a bad trade is swing trading the stock market. I don’t know if that’s the best segue into that, I tried.

12:10
But in any case, Swing Trading the Stock Market, this is going to give you all my stock market research that I provide listeners with each and every day. That’s going to include multiple videos every day. I do videos on different trading ideas, I do it on big tech stocks, I do it on the overall market indices, also provide daily watchlists, weekly master updates, good stuff there that you’re getting like for rock-bottom prices. But check it out, swingtradingthestockmarket.com.

12:48
If you’re listening to it on YouTube, then it’s just clicking the join button down below and you can get access to it there. Really good stuff guys, I promise you. Yeah, I don’t really have too much more to add to this whole conversation about earnings. I didn’t think it was going to be a very long podcast and it looks like I’m probably right about that. So I’ll go ahead and wrap up the show.

13:06
Thank you for listening. Make sure to check out swingtradingthestockmarket.com and make sure to keep sending me your questions. ryan@shareplanner.com. I do read them, I do try to make podcast episodes out of all of them. It means a lot to be able to hear from you guys, to hear your stories, to hear your struggles. I want to make a podcast out of your problem.

13:21
So keep sending them to me, ryan@shareplanner.com. Leave me a five star line, whatever podcast platform you’re listening to it on. YouTube, like, subscribe and do all that cool stuff. Thank you guys and God bless.

13:42
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13:59
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