How a Pro Trades Stock Market Earnings Season

How a Pro Trades Stock Market Earnings Season
November 3, 2021 Tyson Clayton

Tyson Clayton is a full-time Forex, equities and crypto trader, international speaker and markets instructor for Market Traders Institute. He’s trained thousands of investors worldwide inside his Money Flow and Equities on Demand trading rooms. 

Big Tech just came out with third quarter 2021 earnings results.

Market participants are closely tracking them given the developments we have seen lately.

You see, the past couple of years has brought liquidity, boredom, and gambling instincts to markets, which has led many to make millions at the click of a mouse. It has also brought many novel concepts in the investing world: NFTs (non-fungible tokens), SPACs (special purpose acquisition companies), Robinhood, dogecoin, Reddit, and so on.

And with this, we have seen the markets going from lows to highs and phases of extreme volatility.

If you’re trying to make sense of this wild market, I suggest you check out this short recording: Two Seasoned Analysts Show You How To Navigate Stocks and Equities Trading

It’s where my trading colleague Chris Pulver and I discuss our favorite stocks and options picks in the last massive stock market sell-off and how we made handsome returns trading them.

Speaking of great returns, let us see how the results have been this season and if there’s a strategy to trade them.

Strong Earning Season Continues

Continuing the momentum from last quarter, earnings reports have been stellar recently as well. The upbeat earnings have in fact helped the market touch record-highs.

All major groups in the S&P 500 have seen a positive July-September quarter.

Morgan Stanley, Wells Fargo & Co., and Citigroup Inc. posted solid results.

Bank of America Corporation did better than analysts’ earnings estimates as fees jumped at its dealmaking unit.

United Parcel Service Inc. (UPS) and General Electric Co. also reported strong numbers.

Here’s how the big techies performed…

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Big Tech, Big Profits

Alphabet (GOOGL) reported better-than-expected third-quarter earnings.

Revenues were up 41% year-on-year (YoY) and the cloud revenue came in at $5 billion. The company saw strong growth in cloud units, and forward guidance remained on track for continued business growth.

Facebook (FB) reported a 35% YoY growth in its revenues in Q3CY21, while net income grew 17% YoY to $19.9 billion. The rise was seen on the back of strong advertising revenue.

The company announced two new financial reporting segments to be implemented from the next quarter. These are Family of Apps (FoA), which includes Facebook, Instagram, Messenger, WhatsApp and other services and Facebook Reality Labs (FRL), which includes augmented and virtual reality-related consumer hardware, software, and content.

(Starting Dec. 1, 2021, Facebook will change its corporate name to Meta in an effort to rebrand and shift its focus to building the “metaverse,” a virtual world in which users live, work and play online. Facebook’s stock will also begin trading under the ticker MVRS.)

Amazon’s (AMZN) revenue was up 15.3% YoY, but the earnings per share (EPS) fell below expectations and were down 50.5% YoY.

Apple (AAPL) posted a September quarter revenue record of $83.4 billion, up 29% YoY. It declared a cash dividend of $0.22 per share of the common stock, which is payable on November 11.

While Amazon and Apple posted a healthy performance, the results were short of estimates, which led their stock shares to trade lower on Friday last week.

Big Tech’s Influence on Markets

Earnings announcement from the big tech bears importance as they influence markets domestically and globally.

These are the heavily weighted stocks in the index and capture a major chunk of the total US equity market value.

What’s more is they come from the same tech sector. With such concentration, any pull back in tech sentiment can impact overall markets.

Lastly, industries globally follow trends and get business from the big techs, and any major change can cause a ripple effect on global markets too.

Here’s How I Think You Should Trade the Earnings Season…

If you have been an entrepreneur, you’d know how quarterly earnings and projections are futile.

Take the example of General Electric (GE).

Under the leadership of its CEO, Jack Welsh, GE was driven by short-term targets. Perform or perish was the guiding mantra.

Obsessed with earning expectations, the company surpassed estimates every quarter for almost a decade (1995-2004). The stock price followed. But as the subsequent years revealed, this growth came at a huge cost and with accounting gimmicks.

The point being – there’s a lot of noise in the markets out there. And it only increases during the earnings season.

The increased market movement may lure you to take fast action. I believe it’s important that you have a solid trading strategy in place and stick to it during these times.

Also important is to focus on your downside risks and manage them with the right asset allocation.

You may be off consensus with these approaches. But you could also potentially beat the markets following them.

In our Equities on Demand trading room, Chris Pulver and I will show you how this system works.

We’ll also teach you how you can risk less and make more out of the markets.

To know more, and also get the strategies on how to trade the earnings season for a higher profit potential, click here.

Happy trading!

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