Monday, March 19, 2007

New Strategy - Case Study

As many of my readers know, I have a strong urge to buy stocks ahead of earnings in hopes to make fast money. I have lost countless dollars using this strategy and rarely is it profitable. This is not investing it is gambling!

However, I have noticed that the stocks I bet on almost always rise in a straight line a few days before they report. In order to profit from this rise, I have developed a new strategy:

I want to buy well known companies, that many expect will beat expectations, a day before they report, depending on market conditions, and immediately set an order to sell @ $0.50, $0.75, $1.00 above the purchase price. (depending on how volatile the stock is)

Let's use Adobe (ADBE) as my example, since this will be the first stock I'm applying this new strategy to. The company reports Tuesday after the close, I want to find a good entry point a couple of days before the report. I chose this morning @ $39.80, not the best entry but it works. I figured given the hype that surrounds Adobe I could easily get $1.00 between now and the report (given the market conditions), so I set my limit order to sell @ 40.80. ADBE closed @ 40.24, $0.56 away from my target. If it fails to hit my target, I will blow out the position a few minutes before the closing bell. Let see how it turns out tomorrow.

1 comment:

Anonymous said...

This is a good strategy, I hope it works well for you. I'm interested to hear how it goes. If you get some good action in the 2-3 days leading up to the earnings release then maybe you can just blow out half of your position, that way you're involved but you likely wont be hurt that bad in the event of a sell off.