Hey everyone,
This is my first blog post on Tradeking, I'm just trying out the new feature.
So let’s get started eh?
Past few weeks I've been playing Equity earnings, usually betting on the
companies to post a higher EPS than analysts predict. As usually happens, a
company which posts higher earnings usually receives a bounce up. So far, I've
played Del Monte (DLM) and Smithfield Foods (SFD), buying both a
day before earnings were posted and subsequently selling them shortly after
earnings, coming out with a good sum of money both times. Kroger (KR), a
grocery store chain was also bought and sold, though with a smaller degree of
financial success.
My plan backfired though on Smith & Wesson (SWHC) and Apollo (APOL).
I had bet on SWHC earning more due to lower commodity prices and the increase
in gun orders. However, according to the CEO this is may only be temporary as
the economy worsens and people begin canceling gun orders. The stock tanks 5%
the following day, I had to get out ASAP. Technically, what I didn't see in
this stock was that only a few days before, the stock had jumped several %s on
earnings speculation. Seeing this, I should have read the indicators and
instead put in a short order rather than having a bullish outlook.
The losses continued, I used the back tracking tech analysis and decided to
play the next recession stock I had in mind, APOL. APOL, as many know, is the
owner and operator of various education resources, including University of Phoenix.
While I shorted the stock at 68.02 and the following day it reached a low of
65.51, I decided to hold the stock. Following trends mentioned previously, I
suspected while earnings were to be excellent, they would not be sustainable.
APOL has been receiving record enrollment numbers due to the worsening economy
and many workers going to college to get their associates, or to bone up on
their skills. Earnings were posted, and the next day the stock was up to 72!!!
I quickly bought to cover my shares, wow what a loss! I believe the large jump
in this stock didn't come so much from record earnings, but from 2 elements,
the large share buyback going on at APOL and many of the students switching
from Associates to Bachelor's degrees, indicating to a point low consumer
confidence in a quickly and speedy recovery.
Overall, you can take away 2 things from this blog.
1.) Play Food stocks, as you can see, looking at GIS, K, any packaged/discount
food brand or supermarket, you will see a bubble forming as people begin buying
more and more of these foods. I believe, while commodity prices are beginning
to rise again, this will be offset by consumer demand for cheap, quality food
products. Earnings will be good for ALL these companies going into the third
quarter. Also check out Yum Brands (YUM), McDonalds (MCD) and
other fast food companies. When people eat out, they will be eating at these
places.
2.) Technical Analysis sometimes works in a bear market, and in my opinion it
has led me to limit losses on stocks while also make some outstanding 2 day
gains in others. But DON'T GET GREEDY! Playing APOL for as long as I did,
hoping for it to sink lower when earnings were reported to be unusually high
was a bad play on my part. I should have known when to walk away.
If you have anything you want to add, feel free! As always, happy trading!
-Mike
“Whoever said money can't buy happiness simply didn't know where to go shopping.” - Bo Derick