Earnings Season Hits Full Swing
As the next round of profit reports comes across the United States, there is growing concern that companies are earning less than what they were expected to. This is leading to dropping stock prices, and causing investors to fear that another major decline in the stock market is upcoming. Already in 2016, stocks had dropped by about 10 percent, and now that recovery has been obtained, people are cautious that this will happen again. This is a realistic fear, and as we prepare a binary options trading strategy, keeping this general picture in mind will allow us to make more accurate decisions, especially if we have a focus on timing our trades to take advantage of the likely ups and downs that earnings announcements will cause.
One strategy that can be used is to find the bottom of the profit announcement trend. This is not something that can be done with exact accuracy, but it is something that can be given a likelihood of occurring when you start taking fundamental information into account. For example, we know that the first quarter of 2016 was rough for businesses all over the world, and this undoubtedly had to carry over into the earnings that companies would see. The dip in earnings that we are experiencing is not a surprise, then, but rather something that more traders should have been prepared ahead of time for. If you weren’t ready to trade off of this information based upon the fundamental occurrences of earlier in the year, let this be a lesson for us so that we can be better able to anticipate price movement the next time that something like this happens.
Earnings season is just starting, too, so it’s not too late to fix our approaches. The so called earnings recession that we are undergoing is expected to be the worst since 2009, and this will probably be at its worst yet for this upcoming round of things. For investors and mid-term traders, the question will be: is this as bad as it will get? Watching the giants this week that are announcing earnings will help us get a read on this. Alphabet, IBM, Intel, Coca Cola, and Starbucks are all posting earnings this week, and the severity of what happens to them will set the pace for how traders should respond.
If earnings are better than expected, you should expect to see markets rise sharply as a response to this. If they are worse than expected, stock prices are likely to drop in response. It’s going to be tough to anticipate a lot of this, but these companies are big, and many of them are included in the Dow Jones Industrial Average, and as a result of this, they have the potential to set the tone for the rest of the marketplace.
Before earnings are announced, be cautious with your trades and limit your exposure. There’s potential for twists and turns to occur here, and what seems like the most likely response isn’t necessarily what will happen. The best approach is to trade as short of a timeframe as you are comfortable with (think 60 second to 5-minute binary options here) and then act appropriately after earnings have been released on your assets of choice. Some companies will not see any major changes, and as a result of this, their movement might be impossible to predict. Avoid trading these companies, but rather go with the ones that have clearly defined movement thanks to a bigger or smaller than normal profit making capacity over the last three months. This will help you to boost your own profits as we make sense of the stock market.