Page 366 - THE MARKET WHISPERER

362 PART 10 - Winning Trades

This page presents all the stocks for which reports were publicized
on July 27,2010. I chose to have the results displayed according to
alphabetically-arranged ticker symbols [2]. If you wish to check the report
date of a specific stock, you can enter its symbol into the field [1].

SMART We do not “go to sleep” holding stocks about to publicize
MONEY reports, since even if the report results match our trading
direction, the stock’s actual behavior can be unpredictable.

Allow me to clarify: it is absolutely prohibited to “go to sleep” holding
stocks about to publicize a quarterly company report. If you plan to buy a
stock for a swing of several days, you must always clarify its report date.
If that date occurs tomorrow pre-market, you are taking an enormous
risk! In fact, even if the report is due out the next day after the market
or even the day after, it is enough for a rumor or two to cause a sharp
gap even before trading begins. In a best case scenario, the situation might
bring you a handsome profit, but in the worst case scenario, you might
experience a scathing wipeout. It is important to keep in mind that the
gamble has 50% odds of the price going either way. Even if you believe
that the report’s results will be far better than analysts’ expectations, and
even if you are proven right, it is still a huge risk. Stocks tend to surprise,
without any connection at all to the reports. Good reports can be followed
by a crash, and vice versa. Even if you are right, the market may not want
to support you.

The only situation in which I am prepared to hold a stock during the
reports period is when I have sold at least three-quarters of it for a very
good profit, and the additional 25% no longer endangers me. Below is an
example with the Lexmark [LXK] company. I bought its stock for upwards
of $46. The profit target for selling three-quarters of the quantity was 3%.
I knew that in several days the company would publicize its quarterly
report, but predicted its stock would reach the profit realization point
beforehand. Indeed, that is what happened. The stinging slap on my face
came with the report’s appearance. Notice what happened to Lexmark: