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A couple weeks ago, I gave you my number one stock to buy this quarter.
I also showed you a unique pattern that revealed why it was crucial you make your move before earnings came out.
Well, now the numbers are in.
Boy did the pattern work…
How Buying and Selling "Early" Could Deliver the Biggest Profits Every Quarter
As you know, I named NVIDIA Corporation (NVDA) as my top stock pick this quarter.
Now this was for a few reasons…
NVIDIA had been (and still is) making headlines over the new Nintendo Switch (the hybrid portable games console/tablet that will be powered by the Tegra x1 SoC). According to the pre-sale numbers, they already sold out.
The company also made its presence well known at the Consumer Electronics Show (CES) in early January, walking away with nearly 20 awards for its GeForce GTX PCs, G-SYNC gaming monitors, and GeForce NOW for PCs and Macs. And it's expected to make an even larger impact in "deep learning" in the future, which includes smart cars, smart homes, smart cities, and artificial intelligence.
But what impressed me the most was the stock's performance over the past 12 months. NVDA tripled in value – we're talking 280% gains – and increased an average of 4.64% leading into earnings in all four of the past four sessions. On top of that, it climbed by about 13% in each of the last four earnings periods, which you can see in the charts below:
And NVDA also met or beat earnings expectations the last eight quarters in a row:
Its fourth-quarter results, out February 9th, were no different…
Nvidia crushed expectations – reporting earnings of $0.99 per share versus analysts' estimates of $0.83. The company also beat revenue expectations, reporting $2.2 billion versus estimates of $2.1 billion.
Now I said that the best way to profit during earnings season is to exploit a stock's historically, back tested price movements by initiating your trade before earnings come out. I also said that selling right before February 9th could turn out to be your best play in case NVDA ran up right before the announcement.
And that's exactly what happened…
Between February 3rd and February 9th, NVDA steadily climbed from a closing price of $114.38 to $116.38. So if you placed a trade and sold out right before earnings, you likely pocketed an attractive, five-day profit. And given the selling that took place after earnings, that's exactly what other traders did. As of yesterday's market close, NVDA was trading at $108.78 – a nearly 7% drop in price since earnings came out.
As far as any profit-taking you can do now that earnings have come and gone, it's really just a coin flip. And though there might be a value opportunity in the future, NVDA is a good example of why it's always best to look at any g…
About the Author
Tom Gentile is one of the world's foremost authorities on stock, futures and options trading.
With more than 25 years' experience trading stocks, futures, and options, Tom's style of trading systems and strategies are designed to help individual investors propel themselves past 99 percent of the trading crowd.