The summer doldrums are here, though you might not know it…
Markets continue to make new all-time highs on a regular basis.
Inflation and job numbers are cooling, suggesting the Fed might announce interest rate cuts later this month.
The 2024 election looms, fueling a bullish pattern for stocks.
AI continues to be the biggest investing trend in the world, with just a handful of stocks pushing markets up over the last 18 months or so.
All of this supports my bullish long-term outlook for stocks – and my projection for the SPDR S&P 500 ETF (SPY) to hit the 580 level by the end of the year.
For what it’s worth, I think the next rate cut is already baked in – so even if we see one in July, I don’t think that’s going to really drive markets this summer.
However, there is something BIG coming that’s going to give these markets some much-needed juice over the next few weeks.
The One Thing Traders Need to Profit
For traders to make real hay in the markets, we need one thing that we’re missing right now, and that’s volatility.
Now, if you’re not familiar, volatility is a measure of market sentiment – how likely stocks are to make large price moves. For the overall markets, this is measured by the VIX index, also known as the “Fear Guage.”
The higher the volatility, the more likely it is to make a big move – up OR down.
Now, volatility has been at or near historic lows since late 2023. Despite a spike in April, volatility has remained below 13 for most of the year.
Now, for individual stocks, I look at what’s known as Implied Volatility, which is a measure of how the market thinks a specific security is going to behave. The higher the IV, the better chance a specific stock is going to make a big move.
So as traders, we love periods of high implied volatility, because we know the stocks were trading have a chance to make a big move. So whether we’re moving in and out of stocks or trading options, periods of high IV are a great time to profit.
If you know what you’re doing.
Remember, volatility is not a directional indicator. The higher the IV, the more likely a stock will make a move.
But volatility is by its nature unpredictable. So it’s impossible to guess which way a stock is going to go.
Unless you can find a reliable pattern…
The Most Profitable Season in the Markets
Earnings season is hands-down the most lucrative time of year for traders.
For most stocks, Implied Volatility spikes ahead of earnings reports. That can push the price either up or down in the two weeks before a company goes public with its quarterly results.
Some stocks move UP ahead of earnings…
Some stocks move DOWN ahead of earnings…
And my research shows a handful of stocks consistently see outsized spikes in IV and move in the same direction, quarter after quarter…
But this is where you have to be careful.
Because there’s a right way and a wrong way to trade earnings.
If you do it wrong, you can lose a boatload. But if you do it right…
And that’s what I want to talk about today:
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The WRONG way to trade earnings
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The RIGHT way to trade earnings
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My top 10 picks for Q2 earnings season
I’ve recorded a video to walk you through everything… why most traders get killed during earnings season… the one way you can protect yourself from painful earnings-season losses… and 10 stocks I think are going to make waves in the coming weeks.
Just click the link below to get started now!
Good trading,
Tom Gentile
America’s Pattern Trader