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A Six-Figure Earnings Season Mistake?

A Six-Figure Earnings Season Mistake?

Earnings season kicks off today, and I’m not the only one eyeing this week’s lineup…Delta Airlines (DAL) is set to report earnings on Wednesday. It’s finally experiencing some normal travel volumes since it was slammed by Covid.And yet its stock is still trading 35% below its pre-pandemic peak — while the S&P 500 is up over 30%.At least one Big Money trader thinks this airline giant is due for a rally. Last Friday, they placed a quick six-day bet on DAL to the tune of $110k. The thing is, I like DAL as an earnings play. It’s one of the tiny handful of stocks I track during each earnings season (I’ll tell you why in just a bit).But this trader made a critical mistake with their timing.Let me explain…

A Simple Six-Figure Mistake

DAL made my earnings season shortlist because, over a decade of data, it’s shown a tendency to make big post-earnings moves.But looking at the price action, I’m not too sure about its odds this year…There are some valid concerns weighing on the stock — namely higher costs due to fuel prices and the pinch inflation is putting on consumers.On the chart, we can see that these pressures have already impacted the stock. It’s showing some weakness as it sits in a clear downward price channel.After trending higher since the March 2020 crash, shares topped before reaching the previous high. You can see the downtrend on the chart, between the red resistance and green support lines.

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This trader may be confident enough to place a bet ahead of earnings…But that’s not the smart play.The smart play is waiting until after Wednesday to take action.

The Smart Way to Trade Delta

I’ve studied earnings for a decade now, and the best possible time to place a trade is right AFTER the big event, not before it.That’s when all the data is being priced in and we get a clearer take on the stock.Delta is still 35% below that pre-pandemic peak. It’s stuck in a clear downward price channel, and is facing rising inflation and fuel prices.At the same time, SPY is up over 30% since the pandemic started. Delta just isn’t participating in the broad recovery.But with a pivotal earnings announcement coming up, anything could happen…If DAL beats earnings expectations by at least 5% AND the stocks pops 5% or more, I’ll be looking for the stock to break out of its downtrend.If this signal triggers, look for call options to profit as the stock drifts higher over the next couple of weeks.My subscribers are gearing up to place lots of trades like this over the next few weeks. To see which other companies qualify for my “Winning 75,” click here.

Regards,Chad Shoop, CMTEditor, Quick Hit Profits

Chart of the Day: TWTR Is a Case Study in Buying Into Hype

By Mike Merson, Managing Editor, True Options Masters

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Well here we are, a full week later from the “Elon Musk is taking over Twitter” headlines.The stock jumped as much as 40% in a week, and has since fallen about 17% from that peak.What’s the headline this morning? Elon Musk is NOT actually joining Twitter’s board. Imagine that.Don’t get me wrong, the stock is still up. And this is likely to put a floor under the price for some time, as traders anticipate changes from the world’s most beloved space-billionaire to save Twitter’s business.But if you were skeptical of Twitter’s price action last week, you were right to be. It was a bad buy at pretty much any time except Monday morning.  This is a case study in buying into hype. Unless you were quick on your feet, you more than likely have lost money on this trade.Whenever something like this happens, you should always just take a look at the chart and sit on your hands. In all likelihood, when the hype dies down, you’re going to get better prices than the folks buying blindly into the news. TWTR is going to open below its 9-day EMA today. That’s acted as support for the past few weeks. So, while it’s possible it could go lower, I expect TWTR to hold here if the broad stock market doesn’t tank.

Regards,

Mike MersonManaging Editor, True Options Masters

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