≈ How close to earnings should I hold my trade? ≈

Traders,

In Thursday’s Tackle Today message, we outlined the coin flip odds associated with earnings. Given that reality, surely you see the folly of holding a short-term trade into the event. In our Technical Analysis 101 video series, we suggest that the best trading opportunities have two characteristics.

The first is a favorable reward vs. risk ratio of two to one. In other words, we want to enter stock trades that risk $1 to make $2 or more.

Second, a high probability of profit. Said another way, we seek to buy stocks when they offer patterns that suggest the price is more likely to rise than fall and vice versa for shorting.

The assumption when buying a stock that boasts a bull retracement or bull breakout pattern is that our win rate will be greater than 50%. But even if it’s not, the low risk versus high reward still gives us a shot at profitability.

Can you say the same about buying a stock right before earnings?

We can’t. And that’s why we’re not fans of holding short-term trades into the event. As for long-term investments, well, that’s a story for tomorrow. Here’s one more item to consider before then.

If you’re wondering how close you can hold a trade when its quarterly report is approaching, then here’s your answer. You can technically hold your position until the day before earnings (if they report pre-market) or the day of earnings (if they report after the bell). The key is to not hold through the event.

#TeamTackle

Chart of the Day

Roku

ROKU is up +7% in early trading on Tuesday. The high base pattern is breaking to the upside. It was one of the stocks on this week’s Bulls Watchlist in our Options Report.  Review the full list here: https://tackletrading.com/options-report-january-16th-2021/

Video of the Day

Financial Sector Analysis

At the beginning of earnings season, the financial sector dominates the bulk of earnings reports. Last week, we had some key names report like C, WFC, BLK and JPM.  This week will bring more names into focus, with BAC, SCHW, GS and STT reporting this morning before the bell.

Today’s line up

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