Friday, 3 May 2013

A cruel reminder not to hold a stock through Earnings - Genting

Dear Friends,

Today we face a cruel reminder of not to hold a stock through earnings. In the past, I have advised short term traders to liquidate all positions before earnings. This is especially so for Genting today. After powering forward for the last few days from $1.40 to $1.64 highest yesterday, today it gaps down to close at $1.485 after a poor poor earnings results.

This is the power of earnings. It has the ability of causing a stock to lose 10% of its value in a single day. After 10 years of trading in the US market, I have a phobia of holding a stock through earnings as it seems too unpredictable whether a stock will gap up or down. It is like holding a time bomb to me.

I would encourage all short term investors to adopt the habit of liquidating your positions going into earnings. However, if you are a long term investor, a 10% drop is still ok, as it may still come back and may even be a good opportunity to add on position if you think it is worth it. It is important to know your trading style.


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