A regional airline missed its earnings by 16 cents and the stock went up almost seven dollars. Say somebody handed you that report an hour early. You knew the miss was coming, you knew the size of it, and you shorted it. You got run over anyway. That’s the part nobody wants to hear. Having the number doesn’t help you. The number is not the trade. But there’s one filter that would have kept you out of that mess entirely, and I got it standing in my father’s office when I was eight years old. Never short a low multiple Never short a stock with a price to earnings multiple under 10. Never. That’s for dummies and it will bankrupt you. I’ve said it a dozen times and people do it anyway. The price to earnings multiple is just what you pay for a dollar of the company’s profit.

Microsoft had a 29-point expected move going into its earnings report. The stock jumped 16%, its biggest day since October 2008, and added roughly $450 billion in market value. That is the largest single-day gain any stock has ever posted. A lot of traders sat short through it anyway, and some of them aren’t trading anymore. That’s not hindsight. The 29 was published. It was sitting right there for anybody who bothered to look, and it told you exactly what you were walking into. Most people never look. They pull up a chart instead, and I’m telling you the chart is worthless the second a company reports. One number decides whether you can carry a position through earnings, and it gives you three possible answers. Screw the chart. It’s useless on earnings.  I don’t care what pattern you found or how clean the setup looked yesterday. A company reports and