Earnings Season Forecasting

by Ian Harvey

August 01, 2017

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When forecasting predictions in the earnings season, or for that matter, at any time, it is important to solidly research the company fundamentals, the sectors performance, and economic status at the time, and other factors pertaining to the company’s health, and then apply the appropriate course of action on the investment.

Volatility during the earnings season puts an added pressure on determining a stock's direction. At Stock Options Made Easy (S.O.M.E.) we specialize in options trading; therefore, we need to decide if a stock will be going up – call option – or down – put option. In many cases volatility can lead to substantial profits, and deciding if an earnings report is going to “beat” or “miss” is very important as to how to play the trade. And the tricky part is then predicting if a “beat” leads the stock higher or lower and vice-versa for a “miss.”

Since the U.S. stock market is on a mission to march higher, it is difficult to foresee a typical, sharp downturn, or even to remember what it feels like. At the present time there is a definite lack of volatility, as can be seen with the CBOE Volatility Index (VIX) – the “fear gauge” --  which has been flirting with its lowest close on record; whilst the Dow Jones Industrial Average (DJIA), S&P 500 index (SPX), and the Nasdaq Composite Index (COMP),  scale new heights.

When viewing stock earnings external influences, there is preternatural resilience present. Any disturbances associated with political worries – investigation of Russian ties with President Donald Trump’s administration, the continual infighting within the Trump administration -- the Fed rate decisions, as well as the global aspect politically and economically -- has not caused any major fluctuation in the stock market.

And, any pullbacks and volatility are perfectly normal parts of bull markets and are needed to flush out the weak hands, as well as provide excellent buying opportunities for the astute and well-prepared trader.

The tech sector, although suffering some set-backs at the present time, is still in a bullish phase; and it is projected that the tech will continue to outperform as investors chase growth stocks against the backdrop of a subdued economy. This is where investors tend to gravitate to the more scarce sectors, such as commodities which may provide secular growth prospects; and an understanding of this is important when trading the earnings season reports.

It is important to realize that the tech sector is still alive and well, as superior sales growth will drive technology stock outperformance in an otherwise lackluster stock market.

Apart from tech, overall second-quarter earnings have been solid if not spectacular, which has provided some great profitable trades.

So, back to forecasting the earnings season, and predicting the outcome expected for selected stocks; whether a company will beat or miss estimates, whether the stock will appreciate or depreciate as a result and what strategies investors and traders can use. These are the specialty of Stock Options Made Easy due to thorough investigation and fundamentally based research.

So, if profiting in an earnings season is of interest you, become a member of S.O.M.E., and put the recommendations to use either as a part of your strategic portfolio or as the entire trading strategy.

Our proven track record says it all!!


Best of Trading,
Ian Harvey
Director of Stock Options Made Easy


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