I have written extensively since our blog began regarding “In Play” stocks. During earnings season there are many In Play stocks to choose from each day. Traders should choose no more than two or three of these stocks each day to focus on. This is the case because you can make a lot more money trading one or two stocks well than trading many stocks poorly.
Prior to the start of earnings season I was trading FAZ almost every day. But I made it clear to our desk that once earnings season began my focus would change to stocks with fresh news. This is where a skilled trader’s edge exists. The increased order flow in stocks with fresh news create greater liquidity, intraday volatility, and great risk/reward setups that are EASILY recognizable.
During the past 7 trading days I was able to find a new In Play stock each day. My worst day during that period was finishing up over 2K. Certainly my trading skills played a large part in my success each day but a larger contributor to my success was proper stock selection. Some of the stocks I have traded recently include RIMM, AAPL, QCOM, AXP, GS, MS, and AMZN. Take a look at the chart of QCOM below from the day it released earnings. Even a novice trader would probably have crushed QCOM if they were aware of the resistance levels at 42.60/43. Take a look at the AMZN chart below. How difficult do you think it was to make money when it traded above prior resistance of 83? Not very.
Tomorrow I will trade V which released earnings after the close. I will twitter key levels before the market opens at 9:30. I will blog later in the day about how it traded during the Open and offer some advice for what to look for during the Close.