10 Stocks to Trade for Triple-Digit Returns

We all know the old saying: history tends to repeat itself.

This applies to many things, but it’s never been truer then when talking about the stock market.

That’s why looking at historical patterns is one of the most surefire ways to score big in the stock market…

And with fall earnings approaching – history is all you need to grab the cash you’ve been looking for.

Here’s the number one thing you need to know…

10 Fall Earnings Plays with 100% Historical Accuracy
A big part of trading is predicting the future – and the best (and only) way to do this is by turning to the past.

For example, moving averages are produced by calculating historical prices and are illustrated as a line on a chart.

These moving averages can be used in several different ways.

For instance, two moving averages are used in the “10/30 crossover that we talked about a few weeks ago.”

Regardless of the strategy, though, it really all boils down to one thing: taking the historic results and data and applying them to the live market.

Now, there are thousands of strategies out there, but today, I want to talk about one of my favorites: stocks that gap on earnings announcements.

This pattern is reliable, consistent and it tends to repeat more than not.

Take a look at the chart below on TripAdvisor (TRIP).

As you can see, over the last four earnings periods, TRIP has gapped down two times and gapped up two times. And here’s the thing: stocks that gap will rarely gap in one direction only.
Now, one of the great things about stocks that gap at earnings is that they attract a lot of attention from traders that want to profit from these consistent movers. Many will pick a direction and count on the stock moving that way.

And this attention comes with side effects. You see, there are several stocks that consistently move in one particular direction before the announcement. Some stocks will move consistently up into the earnings announcement – and others move consistently down.

One of the major benefits of this pattern is that we can either buy or short shares based on the direction that the stock takes into earnings without dealing with any potential gap in the wrong direction by holding over the announcement.

The following chart shows you the S&P 500’s top ten biggest movers seven trading days before the earnings announcement:

The first stock in the list, Skyworks Solutions (SWKS) has moved up an average of 5.42% over seven trading days before the earnings announcement for four earnings periods in a row. Each positive move for the past four earnings periods is shown to the right of the average.

The seventh stock in the list, Range Resources (RRC), has moved down an average of 7.46% over the past four earnings periods. You’ll notice the four negative moves shown next to the average. Also shown are the next estimated earnings dates on the horizon, which will be used as our exit.

So, here we have historical data that shows us stocks that consistently move in a particular direction seven trading days before their earnings announcements along with their historical average moves.

If history repeats (which, as we know, it normally does) we can anticipate the seven-day returns shown in the chart.

Trading this pattern is simple:

1. Enter the trade seven trading days before the earnings announcement.

a. Bullish: Buy stock or buy call option.
b. Bearish: Short stock or buy put option.

2. Exit the trade during the last hour of trading BEFORE the earnings announcement.

Here’s Why We Only Trade Options
Aside from making about 10x more than those who trade stocks – there’s other major benefits to trading options…

1. You Can Start with Very Little Money

One of the best benefits of trading options is that you don’t need much money to start. While the minimum amounts to start trading vary from broker to broker, most brokerages only require a deposit of $2,000 or less

2. Options Aren’t Just Tools for the Elite Anymore

Options used to be reserved for the elite few. But not anymore… now options are accessible to all people. And virtually any discount broker provides access to them.

3. Options Allow You to Trade All Markets

You can quickly – and easily – create a potentially unlimited stream of income by simply adding options to your portfolio. And the best part is… you’re not limited by market direction. Whether the market moves up, down, or sideways, there’s always a way for you to profit using options.

And these are just a few of the reasons options are the only choice when it comes to our profits…

Options get more expensive into the earnings announcement as exuberant option traders gobble up the available options driving up implied volatility (price). These option traders are counting on the big moves and are willing to pay a premium for the options.

This is best illustrated in the implied volatility chart below on TRIP:

As you can see, the red line illustrates the demand and corresponding expense curve of options into the earnings announcements (illustrated by the green “E” triangles).
You’ll notice also that the implied volatility (IV) is amplified in the shorter-term options (red for shortest -term, black for longest-term). This is an important distinction.

To maximize the benefit of rising IV, it’s important to use the shortest-term options available.

This leads us to the specifics for trading options on this pre-earnings strategy:

  1. Buy out-of-the-money (OTM) options (1-2 strikes OTM)
  2. Buy first expiration available after the earnings announcement.
  3. Exit last hour of trading day BEFORE the earnings announcement.

Now, it’s important that you talk to your broker to assure that this trading strategy works for your portfolio.

Regardless of what you choose though, this deal offers you the perfect set up to score some major gains.

Good Trading,

Tom Gentile

Paul Ryan is set to introduce a new tax to Congress, and it will cost Americans an additional 30 cents or more per gallon at the pump. Investors like Bill Gates, Warren Buffett, and George Soros have collectively sold billions of oil stocks recently. Now a former intelligence operative is stepping forward to explain why this is the end for Big Oil. Click here to continue...

Source: Power Profit Trades