Why Earnings Season is Important for Traders

 

Every quarter we go through about 30-40 days of quarterly results declarations which is also a earning season. The big names are announced and analysed by TV channels who many times, even invite the management to share their thoughts and commentary. Below the big names, it then (mostly) comes down to which management is willing to spend some money on channel advertising and sponsorships to either have a brief chat (in the middle of the day, seldom in the morning or at the closing) or have their earnings flashed on the screen. But this is just a small number. For the rest of the names one has to rely on websites and exchanges.

But those come without any analysis and most people have no clue as to how to read those numbers. At such times, shows done by the likes of Varinder Bansal (ZeeBiz) or Nigel Dsouza (CNBC) are quite handy because they decode the numbers and put them in some perspective which then become actionable. There may be others also doing the same but these two names are an immediate recall because I do watch these two to get an idea of results.

During earnings season, there are rapid moves in many stocks, driven by numbers and many of them present opportunities for even traders. This is because there is a quick and reasonably large move in prices. The action also shifts from stock to stock swiftly which makes it quite handy for traders as they can keep moving in and out of stocks in quick succession of trading.

Chart signals are just that- signals. Every signal, therefore, has to be placed in the proper context to understand how that signal will play out. Earnings analysis and market reaction to the results present traders with umpteen opportunities for quick short-term trading and momentum investing. This should certainly be taken advantage of by traders.  A signal that is now strengthened by context can yield us better profits than one taken blindly without a background.

I find that many traders simply do not pay any attention to quarterly numbers in earnings season, believing that it is of use only to fundamentally oriented players. Far from the truth. Start doing this and see how matters improve. It helps me a great deal in planning short term investment and I heartily recommend this route.