The Stop-Loss and Its Importance at Earnings Season

By Paul Goodwin, Chief Analyst, Cabot Emerging Markets Investor
From Cabot Wealth Advisory 

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The stop-loss is always an important tool, but never more so than during earnings season. Understanding the best way to use a stop-loss at this time should improve your results.

The quarterly earnings season sends shivers of fear down the spines of investors. It's that reality check thing again. Stocks can rise on hope, but a bad earnings report can do a Hindenburg on an individual stock and a spate of disappointing results can crush the market's momentum like a grape.

If you own a stock that misses on earnings, you have a dilemma. You can always put in a tight stop, leaving enough wiggle room so you don't get stopped out of a stock that then takes off. But when the news is bad, your little stop will often be swamped in the flood of selling, resulting in a much bigger loss.   

So keep your stop-loss in place and watch the news closely when your companies' stocks are due to report. If you're not sure when that report is scheduled, you can find it at finance.yahoo.com. Go to the main page for your stock and click on the "Analyst Estimates" heading on the left side of the page. If your company has announced the date for its earnings report, it will show up there. This can help you decide on the best stocks to keep.

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