Summer is a time of the year when we have so much to look forward to and do. While we’re enjoying our hard-earned vacations after a tumulous year and a half of a global pandemic, we’re setting our eyes on the season ahead because fall will bring another earnings season upon us.
Earnings season is that time of the year when many publicly traded companies release their quarterly earnings reports. Those earnings seasons usually start one or two weeks after the last month of each quarter (a.k.a. December, March, June, and September).
So, we’re setting on eyes on October 2021. And you should, too. Because these seasons are open for everyone to invest in, we all get comprehensive information about the financial states of companies. That means we can make up our minds if we want to be or remain stockholders at these companies. We can make informed decisions on the topic.
So let’s dive more into the topic of earnings season and learn how we can trade this season profitably.
Why Is Earnings Season So Important?
Earnings season is a highly active time in the market. Analysts, traders, and investors all examine companies’ earnings reports in great detail, and they make decisions about their positions in a company.
That leads to many shifts in firms’ shares – some companies see jumps and falls of 30% or more.
Many traders happily await these times of the year since they confirm the positions traders place. Going for a short with stock before earnings and seeing the price go down can bring you good things since the psychological fall can jumpstart a sell-off. And production gearing up can also lead to a spike in a stock’s price.
Not all traders want to engage in these seasons since they feel there are many unstable human factors at play.
When Is Earnings Season?
Earnings seasons don’t have their dates set in stone. But generally, we have four earnings seasons: January, April, July, and October.
As we have said, they usually start about a couple of weeks after a quarter (Q1) ends and goes on for around six weeks.
- Q1 earnings season: Quarter finishes on Mar. 31; earnings season starts in mid-April and ends in May.
- Q2 earnings season: Quarter finishes on Jun. 30; earnings season starts in mid-July and ends in August.
- Q3 earnings season: Quarter finishes on Sept. 31; earnings season starts in mid-October and ends in November.
- Q4 earnings season: Quarter finishes on Dec. 31; earnings season starts in mid-January and ends in late February.
Best 3 Advice for Trading Earnings Season
Watch Out For Price Action
Don’t forget to use data from price action. To remind you, price action is the general arrangement of a stock chart. Following a company’s earnings, we have several common price action patterns:
- Stocks can break out higher or lower and then further the trend.
- Stocks can go up and begin a new sharp bearish trend.
- Shares can break out higher and begin another consolidation period. Stocks can also have a more extended period of instability.
You want to be able to spot these patterns early on and use them to your advantage.
Make use of the Earnings Calendar
How can you make use of the earnings season if you don’t know when it’s poised to begin? The earnings calendar can assist you in this. It looks like the economic calendar and tells you when a firm will go live and public with its results.
What sets these two calendars apart? The economic calendar tells us the precise time when a firm will publish the results, while an earnings calendar displays the period. This period is either pre-session or after-hours. That makes sense since firms go public with results before a market opening and after its closing.
Speaking of pre-session and after-hours…
Aftermarket vs. Premarket
As we have said, the time when the company publishes its earnings is essential.
So, be aware in advance when the firm will go public with the information, and then, depending on the time, you should know if your broker lets you place trades in extended hours. If that is the case, then price actions occur not long after a firm shows us its quarterly data.
You can make use of those earnings sessions to place trades with the help of the regular session’s scope. Another method is to use pending orders since that can do you good if the stock displays some instability after earnings.
Earnings season offers some craved-for transparency that the stock marketplace often lacks. In these periods, everyone – from small traders to money managers – gets access to the exact scope of financial data simultaneously.
So don’t miss out on these seasons that can help you learn, grow, and – yes – profit!