 | | Marc Lichtenfeld
The Oxford Club | There's a big difference between trading and investing. When you invest in a stock, you should be going in with a long-term view. You can certainly change your opinion as time goes on if events warrant it. But if you plan to hold a stock for years, you shouldn't get spooked by one bad earnings report (unless something extraordinary happens, like fraud). Trading is different. A trader is often looking for a specific catalyst. ["The single most obvious, predictable, and potentially profitable opportunity I've seen in 40 years."] Many traders view earnings reports as important catalysts. It's not uncommon to see a stock surge after reporting a quarterly earnings beat. For example, Powell Industries (POWL) announced a big earnings beat just last month. It crushed earnings by an astonishing 160%, and shares jumped 20% the day the report was released. A few days later, Hello Group (MOMO), an entertainment tech company, beat earnings by more than 20%. The stock price jumped 36% on the news. So, as a trader, it's important to have near-term catalysts for your stock. Otherwise, you have no reason to believe the price will quickly move higher. "It's a good stock" isn't a valid rationale at all. If you don't have a reason to expect a stock to jump in the near term, your investment could be dead in the water. It could just sit there, doing nothing. If you're putting your money to work in the market in the short term, you want your trades to be completed profitably and quickly. Make your money, get out and move on to the next one. Below are a few potential catalysts that you can look for to get your stocks moving quickly. | Earnings. Most companies announce earnings dates in a press release a few weeks before the report comes out. If the company you're interested in has not yet announced its earnings report date, simply add three months to the last quarter's report date, and you'll likely be pretty close. Companies will begin to report Q1 earnings in the next couple of weeks. So now is the perfect time to stock up on companies that have a track record of beating expectations. Analyst upgrades. When a new "Buy" or "Sell" recommendation is issued, stocks can move significantly. So I want to trade stocks that have the highest likelihood of being upgraded. To do that, I find stocks that analysts hate. If most analysts already have "Buy" ratings on a stock, the chances of an upgrade are slim. The bandwagon is full. But if most analysts rate a stock a "Hold" or a "Sell," you can sometimes get a nice move higher when they upgrade it. Look for stocks that don't have many existing "Buy" recommendations. | | | | Short squeeze. If a stock is heavily shorted (traders bet the stock will fall, so they sell it first and are obligated to buy it back later), every tick higher in price causes a lot of pain. Eventually, when their losses get to be too much, the shorts exit their positions by purchasing the stock. That creates more demand and pushes the price even higher. As the price climbs, more shorts buy the stock, and you can get a powerful move from all that extra demand. Look for stocks that have more than 10% of their float (the number of shares available for trading) sold short. | | | Stocks typically don't make big moves for no reason. You need a catalyst that will push your stock higher in the near term. And I'm convinced THIS earnings season could be a huge catalyst for gains. In fact, I have my eye on three trades that could help make up for ALL of 2022's losses. They're part of an ultra-cheap trading strategy that has outperformed the market by 1,125%. Get all the details here. Good investing, Marc Want more content like this? | | | | | Marc Lichtenfeld | Chief Income Strategist Marc Lichtenfeld is the Chief Income Strategist of The Oxford Club. After getting his start on the trading desk at Carlin Equities, he moved over to Avalon Research Group as a senior analyst. Over the years, Marc's commentary has appeared in The Wall Street Journal, Barron's, and U.S. News & World Report, among others. Prior to joining The Oxford Club, he was a senior columnist at Jim Cramer's TheStreet. Today, he is a sought-after media guest who has appeared on CNBC, Fox Business and Yahoo Finance. His book Get Rich with Dividends: A Proven System for Double-Digit Returns achieved bestseller status shortly after its release in 2012. Marc is the Senior Editor of The Oxford Income Letter, which is based on his proprietary 10-11-12 System. He is also the Editor of Technical Pattern Profits, Penny Options Trader and Oxford Bond Advantage. | | | |
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