Earnings season is always highlighted in a trader’s calendar. These few weeks are the most exciting and potentially profitable periods of the year for stock market watchers as shares that are traditionally quiet experience significant share price moves on a daily basis. And this season is no different.

When shares rally, they typically see a gradual and extended move from their lows, building upon a steady stream of welcoming news. For a company to experience a sell-off requires just a single, drastic piece of news.

Over the past few weeks, we’ve had some “incredible” sessions in which some of the largest UK companies have seen their shares see a protracted sell-off. In some cases, not just by 5-10%, but sometimes as much as 20% or even more, resulting in over a fifth of the company’s value completely wiped off in the space of a day.

This week, it was the turn of the blue chips.

The UK 100 ‘s AstraZeneca (AZN) suffered the wrath of investors following the announcement that a drug trial in its closely guarded and aptly-named Mystic trial had failed. Its shares fell 16% in a single session, wiping an astonishing £10bn from the company’s value.

But when this happens, how can you make money? Perhaps you’re already holding these shares, so how can you protect yourself against these massive share price swings? Alternatively, you might be wondering how to convert these vast share price changes into profit.

Quite simply, you can profit from falling stocks by taking short positions. Using a CFD platform such as Accendo Markets’, you can take short positions on Equities, Indices, Commodities and Foreign Exchange markets in much the same way as a traditional long position.

For example, earlier this month Construction Services provider Carillion (CLLN) shares fell an astounding 38% after a shock profits warning, however the sell-off didn’t stop there. At its lowest closing price on 13 July, the shares had fallen as much as 74% in only four sessions.

Those who opened a short on the second day of the sell-off could have seen up to 57% futher returns whilst those holding shares long could have hedged their position by opening a short position to temper losses.

In this example, you could have seen up to a 57% return, although note had shares rallied, you would have seen losses of an equal size.

But sell-offs such as Carillion’s aren’t unique. Gold Miner Acacia Mining (ACA) saw shares fall 39% over two days in May when Tanzania banned its gold exports. Fast forward to last Friday and the company’s results unsurprisingly showed the ban significantly hurting earnings, resulting in a fresh 17% slide, whilst the hurt continued on Monday as Tanzania demanded a princely tax bill of $190bn, resulting in a secondary (but even greater) 21% share price slide.

AZN’s fellow UK 100 constituent Provident Financial Group (PFG) saw shares fall 17% on 21 Jun as it announced that restructuring would result in a significant blow to profits, before falling another 12% this week after announcing results.

With a further 21 UK 100 companies all reporting results – including AstraZeneca’s sector peer Shire (SHP) – you can’t afford to take your eye off the ball.

Now, more than ever, it’s crucial that you not only do you have a platform that allows you to short shares, but that you also have a reliable news source; a source of information that concise, accurate and timely information to you on a daily basis. Our tailor made research service has been named ADFVN’s Best CFD Research Service for 2017. Why not discover how useful it can be by signing up to have it delivered directly to your inbox, today?

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Mark Crouch, Trader

28 July 2017

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