An article published in Toyo Keizai ONLINE column: Timing of earnings announcements and buying/selling

Good morning, this is Matsushita.

Right now, in the stock market, the first-quarter earnings announcements are in full swing, and individual stock moves are driven by specific news items even as overall market activity remains sluggish.

While traders are reacting to this earnings information,

they are trading based on individual catalysts rather than the whole market.

There are investors who want to actively use these results in their buying and selling,

so today I will write about how to leverage earnings announcements for trading.

Earnings announcements are not about predicting and buying on just any numbers,

and certainly not about blindly jumping in on the released figures.

If you are a medium- to long-term investor,

these figures become very important, but

the more you are involved in short-term trading, the less you need to focus on them.

For short-term traders who check up to these numbers and trade accordingly,

their performance is likely to be quite high.

Here, I will consider how medium- to long-term investors can use earnings.

Theoretically, a stock price is the present value of a company’s future earnings,

so future profit growth is a factor that pushes the stock price higher.

In other words, for medium- to long-term stock investing,

future profit growth works in your favor.

Now, to confirm one fact,

a company’s profits also go through large cycles.

That is, periods of growth and expansion of profits, and periods of stagnation, downturn, or decline.

When you confirm this as a fact, a trend-following investor buys stocks in an increasing profit environment,

and a contrarian investor buys at the points where profits shift from decline to growth.

If you make this clear, you can narrow down trading points technically and buy according to signals,

and earnings announcements will gradually form a flow = a trend as they appear.

If the announced content matches your expectations,

the buying scenario continues, and if it differs from your expectations,

it becomes material for consideration of an exit.

Earnings announcements are not the only factor for trading.

Earnings figures are also one element to consider in your trading decisions.

Always remember this and clearly define your own strategy and rules,

as you approach earnings announcements.

If you do, earnings announcements will also bring you profits.

If you follow these guidelines, earnings announcements will yield you profits.

If you do so, earnings announcements will bring you profits.