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How To Trade Earnings Reports - YouTube
Channel: Humbled Trader
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if you've been around the block and
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traded some stones you may have heard of
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this thing called burning's season
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wabbit season duck season fire
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no it's not wabash season nor duck
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season it's earnings season earning
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seasons are exciting times that happen
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four times a year in which publicly
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traded companies will release their
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financial results basically informing
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their investors how much money they've
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made in the last quarter depending on
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the results these earnings reports can
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create some volatile moves in some of
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our favorite stocks whether it's ripping
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to the upside or dumping to a bottomless
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pit in this video i'll be going over
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exactly what is earning season and why
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you should care as a trader or investor
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and how to analyze some key metrics from
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the financial results so you don't have
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to read through 10 pages of 10q reports
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and most importantly i'll also share
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with you some important trading tips for
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you during these volatile times so if
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you're excited to learn about earning
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seasons to increase your earnings and my
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terrible bad jokes scattered throughout
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the video remember to gently destroy the
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like button all the proceeds from you
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clicking the like button will go towards
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the chosen charity of the month the bag
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holder foundation for my ex-husband mike
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beckholder that starts from the very
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beginning what is earning season earning
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seasons occur four times a year it's a
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period of time when publicly traded
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companies are required to report to
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their investors how much money the
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company has made in the last quarter
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this is important because wall street
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analysts rely on these earnings results
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to determine the value of a stock and
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many institutional and retail investors
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use these metrics and the sentiment to
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determine whether they want to buy the
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stock or just get a goat because this
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baby is taking on huge losses and is not
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making any more money for the company
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nor the investors like we mentioned
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earlier earning seasons occur four times
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a year each lasting around six weeks yes
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your favorite stocks like tesla amd
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netflix and even our best friends
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gamestop and amc will do these quarterly
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earnings presentations every three
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months so don't worry if you just missed
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the last one you will still have many
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more chances to yolo i mean to trade or
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invest in these stocks during this year
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and remember per regulations these
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publicly traded companies are required
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to report their financials update the
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investors on how they're doing and any
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upcoming events or drastic development
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within the business individual companies
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earnings dates are announced usually a
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few weeks before the actual earnings
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report and the conference calls are
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hosted monday to friday during regular
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trading weeks the actual times of the
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report are either before the market
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opens first thing in the morning or
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right after the close most companies at
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least the big tech names like google
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apple amazon or apple release their
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earnings right after the bell from 4 to
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4 30 pm eastern time because they don't
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want to give traders too much of a break
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before the next yolo am i right what
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usually happens on the day of the
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earnings report is companies will first
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of all release a key financial metrics
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basically a quick rundown of how they
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did in the last quarter they'll post
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their revenue figures as well as their
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earnings per share and right after the
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key metrics are announced usually this
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is when the company's stocks will start
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fluctuating after hours or pre-market
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many times as the figures are exceeding
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the wall street expectations you can see
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the stock rip up after hours like this
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amazon chart right here you can see the
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stock took off like a rocket and ran up
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300 to 400 per share after hours on the
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other hand if the company releases
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disappointing financial results like
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this one
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well you can see the stock can still rip
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too
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no not rip to the upside like amazon i'm
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talking about rip rip
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don't worry we'll dive into the details
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of what these key metrics mean and how
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to analyze them as a trader or investor
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in a little bit following the initial
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financial results like earnings per
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share and revenue there will be a more
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in-depth conference call with a ceo cfo
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and coos that's where they'll dive into
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the details of the business such as
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balance sheets new product releases
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consumer trends or even competition
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concerns now i know if you're watching
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this video you most likely don't have
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the time to read the entire 10 pages of
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the 10k on the sec website so that's why
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we're going to be talking about some key
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figures most investors and wall street
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used to analyze whether a stock is a buy
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hold or get out all right so the first
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key metric is earnings per share
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abbreviated as eps earnings per share is
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calculated by taking the company's net
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profit divided by the number of
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outstanding common stock so for example
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if my ex-husband's publicly traded
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company bagholder trading limited
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reported that they made one thousand
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dollars in profit in the last quarter
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and they also have one thousand total
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stock shares available
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then we take one thousand dollars in
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profit divided that by one thousand
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shares to get an eps of one dollar per
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share vice versa if back holder trading
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limited reported that they didn't make
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any money instead they have a loss of
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one thousand dollars instead the eps
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will be negative one dollar per share
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which is a big loss the moral of the
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story here is kids don't backhold like
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my ex-husband the next key metric to
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look at from the earnings report is
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revenue basically revenue is the amount
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of money the company makes from
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providing its services or products to
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consumers even though having a very
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positive revenue does not mean a company
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is highly profitable because none of the
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costs are considered investors still
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value this revenue metric very much
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because a growing revenue is the number
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one driving factor
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that could eventually lead to higher
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profitability essentially if a company
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can have increasing revenue year over
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year this shows growth to their
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investors this is especially important
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in tech companies or growth stocks in
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general since wall street follow the
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statement if you're not growing then you
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are in the process of dying that's why
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amd stock soared after hours after the
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q4 earnings report on february 1st 2022
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not only did they announce they have an
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eps of 92 cents per share they also have
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a very bullish 49
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year-over-year revenue growth another
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great example is google they also
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released their q4 earnings on the same
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day as amd
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google also had some blowout numbers as
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well they had earnings of 30.69
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per share and 32.4 percent
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year-over-year revenue growth in both of
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these examples amd and google they also
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had another very bullish factor they
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issued upside guidance which is the
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third key metric to look out for when
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reading a company's earnings reports in
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the simplest terms a company's guidance
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is how much money they are expected to
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make in the near future and whether they
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are projecting their revenue to grow
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even more
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guidance is often discussed in depth
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during the actual conference calls after
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the initial financial metrics are
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released remember the stock market is
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forward thinking well it's great and
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reassuring for investors to know that
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companies like amd or google have made a
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lot of money in the past quarter
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investors care even more about whether
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they are expecting to make even more
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profit in the future so both of these
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stocks we just talked about did not
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disappoint they both issued upside
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guidance and forecast even more growth
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in 2022
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however for stocks like paypal and
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facebook or shall we call it meta these
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companies are projecting a slower growth
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and subsequently making less money in
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the rest of 2022 and that's why these
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stocks dumped after hours and continued
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lower for many days later remember these
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key metrics in earnings reports the
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earnings per share revenue growth and
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guidance are really just the surface of
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the story
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understanding these figures are enough
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for short term day trading or even swing
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trading however if you are a long-term
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investor i would highly recommend you to
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read the entire earnings transcript or
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tune into the earnings calls live
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alright so now that we understand the
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three key metrics to look at how exactly
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can we both day traders and swing
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traders take advantage of these reigning
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lamborghini opportunities that happen
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four times a year the first thing for us
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traders is to look for the anticipation
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move into earnings stocks that have a
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big following or just enough weight to
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move the indices often can make huge
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moves up or down into the earnings event
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for example stocks like tesla apple amd
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are some of the most anticipated stocks
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that traders love to trade generally
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speaking if the sentiment and the market
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environment is expecting a company to
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release very positive earnings the stock
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could rip up and run into earnings
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however this is obviously not applicable
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to all the stocks in a fearful market
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condition such as during the pandemic or
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high inflation and rising interest rate
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environment we're in right now
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regardless of whether there's any hype
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for the earnings many stocks are still
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selling off like a bottomless pit so
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just be very careful and take into
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consideration all the factors we just
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talked about the second tip i have for
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you and i think this is a very important
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one especially if you are a new trader
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never i repeat never hold your short
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term trading positions into earnings
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this is a true 50 50 gamble a stock can
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beat on earnings and still tank it could
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also miss on earnings and take off like
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a rocket i've actually had personal
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experiences holding these trading
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positions into earnings calls in my
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first year of trading i was new and very
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naive and i really wanted that one home
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run trade and let me just tell you the
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profits from these gamble trades are
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very very small in comparison to the big
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losses the risk was just not worth it
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unless you only have a very small
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partial position or you're hedged with
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options after so many years of trial and
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error honestly my preferred way to trade
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during earning seasons is to trade the
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gap ups or the gap downs the next day
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after the full earnings reports have
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been released which is my third tip for
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all of you traders take the time to
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fully analyze the after hours action on
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some of these stocks that made huge
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moves and use a time to observe how
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similar industry stocks react after
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their earnings by waiting until the next
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day you now have the time to truly
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analyze and read the conference called
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transcripts and get a full understanding
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of all the three metrics we talked about
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eps revenue and guidance and trade the
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pre-market moves the next day
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accordingly if you are looking for more
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in-depth trading strategies to trade
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these overnight gap ups or gap downs
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after earnings reports then feel free to
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check out the humble trader academy on
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my website i talk about trading earnings
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in even more detail in the program these
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are some very exciting times that lead
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to a lot of volatility for us traders to
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capture some decent profits and hey
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guess what even if you had just missed
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this one around there'll always be
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another earnings season in three months
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thank you guys so much for watching as
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always i'm the humble trader and i will
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see you guys next time
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[Music]
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[Applause]
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[Music]
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you
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