My Favorite Way to Play Big Earnings Announcements

Last week, I was playing basketball with the 20-somethings in my local league.  As a member of the “multiple decades older than 20-something” club, I find that I have to bring something more to the court now that I don’t have quite the speed and quickness of my youth.

If I tried today to just drive by one of these young guns, they wouldn’t have too much trouble using their quickness to slide over and legally block my path and thwart my drive.

Instead of counting on my ability to make a quick first move, I’ve found that I can make a few easy baskets a game by playing my defender’s reaction.

Sometime early in the game, the other team usually finds out that the old guy can still shoot.  So, when I dribble up the court, they cover me tightly pretty far from the basket.

And that sets me up to, instead of trying to have success with my first move, use a fake to cause a reaction in my defender and then take advantage of that reaction.

Here’s how that set up in the game last week.  I had hit some long three-point shots already in the night, so my defender was coming out to meet me at the three-point shooting line to deny any shots.  As I came down the court, I slowed at the three-point line and did a quick head fake like I was going to shoot.  This caused the desired extreme reaction – the defender leaped out to try to block my long shot.

His lunge toward me would have thwarted any long shot, but it also me gave me the chance to zip right by him for an easy layup.

And it’s crazy how this action/reaction move on the basketball court lines up with one of my favorite plays when companies report earnings

One Tip to Trade Like the Pros

Editor’s note: The following is a special re-run of the market update that I provided yesterday to subscribers of my elite research service, Stealth Profits Trader. Each week I provide similar market analysis, plus a specific trade recommendation which includes:

  • the exact stock or option strategy to trade
  • my limit price recommendation
  • protective contingency exits
  • a profit-taking exit strategy

To learn more about all of the benefits of becoming a Stealth Profits Trader subscriber, click here.

The open is for the rookies and the close is for the pros…
Old Floor Trader Saying, Unattributed

My long-time friend Brad Martin was a floor trader in the futures pits of the Chicago Board of Trade and the Chicago Mercantile Exchange for over a decade and a half.

He was a savvy guy, and was of that rare breed that could sense changes coming.  He moved off the floor and started his own day-trading room in the late 1990s, just ahead of the day-trading boom.  He then added real estate development to his repertoire a few years later, and rode several projects (that he managed himself) all the way up to top of the real estate bubble.  Most notably, he sold a fully permitted residential development to a big housing construction conglomerate in 2007 – not a bad exit for that “trade”…

Brad’s many years on the floor trading futures gave him tons of great stories, and more old “trader sayings” than you could shake a stick at – including the quote at the top of this article.

Brad explained that opens are when “retail” traders (non-professionals) want to get in or out of trades.  This usually makes trading action quite chaotic with price bouncing all over the place.  On the other hand, it’s pros who are in control of the time leading up to close as they position themselves for the end of the day, deciding whether they want to carry positions overnight or not.

And it’s this same concept that gives us key insight into how the markets have “behaved” during the post-Christmas rally. Here’s what I mean…