Of 483 large-cap stocks and exchange-traded funds in my analytical universe, four broke beyond their 20-day price channels, all to the upside. None survived initial screening.
There are seven prospects for trades coinciding with earnings announcements.
I shall do further analysis on Thursday, April 28.
Earnings season began April 11. The higher pace of announcements will continue for about four weeks from that date.
by Lawrence G. McMillan
Potential trades keyed to events
The dates are those of the events, all of them earns announcements. Events prior to the opening bell are marked "am", during the trading day "mid", and after the closing bell "pm".
Only AMZN among the seven potential earnings plays has sufficiently high implied volatility to qualify for further analysis.
I require volatility in the 60th percentile or higher of its most recent range. AMZN's stands in the 65th percentile at Wednesday's close.
The others range from the 40th percentile downward.
I entered AMZN a week ago on outdated information about the date of the earnings announcement. My analysis on Thursday will focus on whether I need to roll that trade forward or add to it in order to increase chances of success. See the earlier analysis here.
The stocks in my analytical universe all have analyst coverage through the stock-ranking company Zacks Investment Research. Not all of the exchange-traded funds are so covered.
I screen the symbols for historical odds of a profitable signal in the direction of the breakout for the past 12 months.
For symbols whose odds of success are in the top or bottom thirds, suggesting a directional or non-directional trade, respectively, I next screen for 1) suitability of the options grid, including open interest of three figures or greater on the strike prices I would need to use to build a position, 2) implied volatility in the 60th percentile or greater of its 12-month range, and 3) the absence of an earnings announcement within the lifespan of the like options series I would trade.
-- Tim Bovee, Portland, Oregon, April 27, 2016
Tradecraft: Playing the odds to build winning stock market trades from options, a description of how I trade, can be read here.
I can be reached via comments on Private Trader posts or by email at email@example.com.
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Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
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