Be Aware of Upcoming Quarterly Earnings Prior to Entering a Trade

Quarterly earnings results can cause significant short-term price gyrations in a stock. A miss in results, an off comment by an executive during the call, and your well-reasoned stop loss is triggered shortly after you entered the trade.

Take a look at this Starbucks (SBUX) chart (weekly candles):

The stock had been trending down to a well-defined trendline that had started in March 2020. On the week of April 15th the trendline holds. And on the week of April 22nd the stock is bouncing up above the trendline. Seems like a great opportunity to go long.

And then Starbucks reports quarterly earnings the following week:

Huge gap down (on the daily chart), straight through the trendline as if it wasn’t there.

What appeared to be solid technical analysis was nullified by an unfavorable earnings release. So if you’re considering entering a trade near an earnings release date, consider waiting until after the release.