Let's Make Earnings Season Important Again

Now that we officially have a new President and the market has broken its losing streak, it's time to direct our focus back to earnings season. So far, Donald Trump has been completely overshadowing the reports, but that should change next week when the season really kicks into gear.

As Steve said in today's RTA : "keep an even keel in your reaction to each individual report. Don't get too upset if it goes against us…don't get too elated if we seem to have a non-stop string of winners. This state of mind will help us navigate the often turbulent waters of earnings season to get to desired shores of higher profits".

It was a challenging week for the market but it ended on a high note as the Dow broke its five session losing streak with an advance of 0.48% to 19,827.3. The S&P was up 0.34% to 2271.3 and the NASDAQ increased 0.28% to 5555.33. The market reacted much better on the first day of Trump's presidency then Obama's, but we must remember that the now former president came to power during the Great Recession. President Trump has been bequeathed a growing economy and low unemployment, so it will be interesting to see what he can do with that.

The portfolios saw a couple big winners on Friday. Options Trader decided to remove one of its spreads ahead of its quarterly report, which brought the portfolio a triple-digit return. Surprise Trader had its second consecutive double-digit winner from the same stock, and also bought today. Learn more about these moves below, along with some excerpts from other portfolios.

Triple-Digit Winner for Options Trader

→ The Options Trader 's bull call spread in State Street (STT) is fully in-the-money, but the stock has dropped in the past few days. With earnings scheduled for next week, Kevin thought this would be a good time to remove the spread and take a nice return of 104%. Therefore, he sold to the close the Feb. 70.00 Call AND bought to close the Feb. 75.00 Call.

→ The Surprise Trader made a big double-digit profit yesterday as shares of CSX (CSX) soared. But the stock pulled back on Friday a bit more dramatically than Eric was expecting. So the editor sold the second half of the position to secure a double-digit return of 13.8%.

Today's Portfolio Highlights:

• Microsoft (MSFT) has been pretty impressive at earnings season of late with two straight quarters of double-digit beats. Eric is hoping for more of the same when this tech giant reports again after the bell on Thursday. The company has amassed an average surprise of 10% over the past four quarters and has a positive Earnings ESP heading into next week, so it appears set for another solid performance. The stock is also a Zacks Rank #2 (Buy) with a Zacks VGM Score of "A". For all these reasons, MSFT was added to Surprise Trader on Friday with a 12.5% allocation.

• "The inauguration is over and the market chopped around again, much too many traders dismay. Trump was sworn in and gave a populist speech that caused modest selling. However, markets came right back with the S&P finishing up 0.34% and the Nasdaq closing 0.28% higher.

"I talk to a highly skilled trader on instant messenger all day and it was interesting getting his perspective this week. In his words "This is the strongest weakest marker ever". I agree, there seems to be so much energy building up to shoot higher, but it just can't seem to go. Something is holding it back, whether it's a manipulation, foreign selling, democrats selling or whatever you want to dream up.

"When the selling is done, you really have to wonder if there will be anything left to hold the market back, or if we just explode up like a rubber band being stretched too far. We will find out shortly," said Jeremy in Zacks Counterstrike.

• "The Trump economy officially kicked off today as Donald J Trump was sworn in as the 45th President of the United States of America. The volatility that traders had murmured about through the course of the week simply did not show up. Stocks ended on a strong note and the bulls were back in charge. Earnings season ended its first big week without any huge disappointments and now we're set up for a pretty good January so far.

"It looks like smooth sailing on the horizon for the market in the early part of earnings season here. Next week there is a huge emphasis on tech with a lot of big names reporting. Should make for some volatility on the NASDAQ and could be fuel to push the S&P 500 on through to new highs," said Dave in Momentum Trader.

Have a Great Weekend,

Jim Giaquinto

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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