I believe that earnings trades are a crapshoot as far as MY work is concerned. Sometimes my trading parameters will hold and key targets will be met after the report, and other times the result will be a disaster when the results are unexpected or not figured into the market in advance. Unless you know exactly what you are doing with options strategies and are willing to risk some premium for a roll of the dice, I will suggest that NEWBIES stay out of any earnings trading strategies.
With that being said I DO like to analyze the market AFTER earnings reports. There are times, for example like in NFLX, where there is nothing to be done, because I don’t see a setup AFTER the crapshoot. There are times however, like today in $AAPL, where I do see something to do now that the “news” is out.
Let’s take a look at the daily AAPL chart and I’ll explain. We had such an opportunity today where the risk was relatively low if you had the key price levels in ADVANCE.
Note on the daily chart I had run multiple price projections of prior declines within the uptrend. I projected these declines from the recent high made 10/11. ***This chart does NOT include overnight data****.
There were a couple of zones that stood out in this case. The first was the 113.08-30 area which included a symmetry projection along with a .786 retracement. The second zone came in at 112.26-46 with two prior symmetrical projections. Well, the FIRST zone was tested and held in this case. A hold above this zone was followed with a BUY TRIGGER. A buy trigger is essentially price action that suggests it’s worth placing a bet against a key price zone.
A trigger example on a one-minute chart is posted below. Once we saw the trigger with a trade above the 114.21 area, it was worth placing a bet with our risk initially defined below the 113.31 swing low. I always suggest to my traders that you use a trailing stop if the trade starts to move in your favor. The first thing you can do is move a stop to BREAKEVEN!!
Note that IF the most recent low of 113.31 remains intact, the potential upside target #1 off this low comes in at the 120.15 area. There will be higher targets beyond that from the bigger picture work, but this is what we’ll start with.