Even for someone with almost 40 years under their belt every day in the market is a learning curve, and I have been reminded of that on a couple of occasions recently.
The Chips were down
Last week chip manufacturer Intel (INTC US) reported earnings, beating Wall Street’s estimates for Q4 EPS and revenues.
It appeared that this was the latest in a series of positive announcements from a sector that has been driving the market higher in 2024 to date.
The stock was trading at $49.55 and even printed up to $50.00.
So I decided to post a comment on Linkedin reminding people that I had flagged Intel in an article I wrote for Activtrades at the end of June see the link below.
In which I wrote the following:
When I flagged Intel in June, they were trading at $35.99.
So, from that perspective, it looked like a job well done, after all, a +36.0% uplift is not to be sneezed at.
However, what happened next undid all that good work.
Because I fell into the trap of believing my own publicity and posted the following when I reshared the “10 ways to be a better trader article.
“With Intel INTC US trading at $49.55, it’s a reminder that Good analysis isn't just for newbies see this piece I wrote in late June”.
Guiding Lower
Just as that post went live, Intel offered guidance for Q1 2024, which wasn't good.
Analysts were looking for an earnings per share forecast of around 33.0 cents, Intel suggested that 13.0 cents was the right number.
The market took fright and the stock plummeted falling by -11.90% on the session leaving me with egg on my face.
Not a good look.
Takeaways
However, there is nothing wrong with making mistakes as long as we learn from our experience, because it is all part of that learning curve, I referenced at the outset of this piece.
The takeaways from this episode are:
Earnings releases are very often binary events.
And that because markets are forward-looking, what’s gone before, in this case, Intel’s Q4 earnings, is often less important than what’s to come, its Q1 2024 outlook.
Oddly enough there may be another opportunity to trade Intel and the other chip stocks in teh near future because Joe Biden is expected to authorise billions of dollars in subsidies for the sector. According to reports in the Wall Street Journal and highlighted by Reuters.
Those subsidies might go some way to cushioning the blow of Intel’s lowball earnings forecast.
All of which reminds us that markets and the instruments within them are fluid, rarely static, and always subject to change. Even when they are in a long-standing trend.
New information can quickly change investor sentiment. And as was the case in Intel, turn it on its head.
Don’t get comfortable with a position or price action.
Don't assume that a trend or narrative is unassailable, it almost always isn't.
Always test your assumptions and thinking against the current market, and be prepared for the unexpected as far as you can be by:
● Not over trading
● Not concentrating or correlating your positions
● Not losing sight of the number one objective in trading namely Capital Preservation and Longevity.
● Lastly don’t beat yourself up too much, learn your lessons, add what you have learned and experienced into your process, and move on the wiser from it.
The information provided does not constitute investment research. The material has not been prepared in accordance with the legal requirements designed to promote the independence of investment research and as such is to be considered to be a marketing communication.
All information has been prepared by ActivTrades (“AT”). The information does not contain a record of AT’s prices, or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information.
Any material provided does not have regard to the specific investment objective and financial situation of any person who may receive it. Past performance is not a reliable indicator of future performance. AT provides an execution-only service. Consequently, any person acting on the information provided does so at their own risk.