Pre Earnings move in Apple (Ticker Symbol: AAPL) and what to do post earnings.
By now you know that we love earnings season at FibKing Trading. In fact we have an entire chat room for earnings related trades whether it is pre-earnings or post earnings. To learn more about our membership CLICK HERE.
We like to look at various days before an earnings event and test them. In this example let's take a look at 3 days before earnings on AAPL.
What we're looking for:
The chart shows us data over the last two years. Of the last 8 earnings, 6 of them moved up 3 days prior to earnings for an average of $1.52. Only twice did the stock move down 3 days prior to earnings. We also look at the 10 day moving average and see that we are above this technical indicator. When the stock is above the 10 day EMA, it typically moves on average 6 bars or $4.07. So we see that this could have a bullish tone but we are looking at Implied Volatility as our main play. I ran the back test of buying a 40 delta call and over the last 2 years, this particular setup was 2 wins and 0 losses for a total of 126% return. What if we didn't use the 10 day EMA? The results were near the same as far as overall return goes but you had 4 wins and 4 losses. I'd rather cut any losses and play the winners!
Options were purchased for 2.87 on Friday, January 25 and sold on Tuesday, January 29 for 3.25 and 3.05. While the returns aren't huge, a win is still a win!
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It's the most wonderful time of the year! Yes Christmas just wrapped up last month and I'm not talking about that. I am talking about the gift that comes 4 times a year. EARNINGS SEASON! We are going to take a look at Netflix (Ticker Symbol: NFLX).
What's the chart say? To start, the last wave low to high shows we just completed to the 1.272. We can also see that the timing was complete when we hit the 1.272 level. Now we take the last swing high to low and we see we are currently at the golden ratio of 61.8. So a nice bounce off the low and where do we go from here? Ideally I like to wait for us to get above the 78.6 level ($284.28) but with the backtested data that I'm about to show, I went ahead and entered the trade.
Here are the last two years doing this trade. 8 trades and only 3 losses. A total profit of $2,445. But what if we could use other technicals to trim the losses? Would it help? What about at the key fibonacci levels? Should we wait to see if it could clear the 78.6 like I mentioned above? First let's see the opening trade 14 days before earnings. I purchased a $285 call for $11.00 each.
The next day...
So here we are above the 78.6 level the very next day! Here is where I would load up and try to take this to the next target, 127.2. Above, I mentioned what about another technical? Let's add the 50 day exponential moving average to the chart and let's only take the trade if NFLX is trading over the 50 day EMA.
So now over the last two years, NFLX has only been over the 50 day EMA when this trade takes place. No losses and a $1,685 winner! So of course I had to buy more. So now I own 285 and 300 calls.
We need target levels but let's also look at a tool that was made for members to show us stats regarding NFLX when it crosses above the 50 EMA. Let's take a look and I'll explain what it all means.
We have the 1.272 extension level that was hit the next day. Then it consolidated 3 days after that. We didn't hit any timing levels yet until we reached the next 1.618 level. That's all fine and dandy but what about the 50 EMA? What does this info tell us? Over the last 2 years when NFLX is over the 50 days EMA it usually last on average of 9.4%/$32.98/19 bars. So can we hold NFLX longer into earnings? Based on this information, I think it would certainly be ok.
The results are in
Today is Netflix announces earnings and profit has already been taken.
Thanks for reading and up next is Microsoft (Ticker symbol MSFT)