In the many years I’ve been trading, I’ve never seen perceptions of situations change as much as I have in the last year earnings-wise. A year ago, the markets were happy if a company missed earnings as long as it didn’t miss by a lot. The next phase was that earnings needed to beat estimates but it was Ok if revenues didn’t because it still showed earning power was there. The next phase has been a desire to see revenue growth with earnings to show that earnings weren’t made or lost by accounting mechanisms and/or cost cutting. With the recent climb in the market, we’re now at the next phase. For a stock to rise, it has to not only have a decent quarter, but it must show earnings growth and revenue augmentation for the foreseeable future. For instance, in the case of Equinix (EQIX) recently, the company saw revenue of $328 to $330 million whereas the previous expectation was $335. Boom ka-pow, 30% haircut. Pepsi (PEP) announced earnings which met expectations for the quarter, but saw $4.08-$4.12/share for next year vs $4.17 so it got hit. On Wednesday morning, Robbins & Myers (RBN) earnings 45 cents vs 40 expected but saw .25-.35 for the next quarter with an estimate of 32 cents so it declined. Thus, as we hit the core of earnings season over these next three weeks, know the whole package- earnings and revenues growth in the future- is going to be needed for a stock to keep going in what has been a very strong tape.
Markets in Asia were down overnight with Hong Kong down 0.4% but much worse in Tokyo with the Nikkei off 2%. The ever-strengthening yen as well as a rumor that the Chinese government is about to force banks to tighten lending standards led the declines. The bourses are down as well in varying amounts from 0.2% in Frankfurt to 0.5% in London to 0.8% in Paris. The dollar is marginally mixed in trading a little weaker against the yen and a little stronger against the euro. Oil and gold are both down about 0.5%. Futures are down as well. Look for a bit more active day than yesterday, but contained overall with prices mixed to slightly weaker. Focus on the merger rumor stocks, the earnings plays, the solars to see if there is follow-through from yesterday, and big cap tech.
Reiterating-
If the whole story is not there -
If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.
If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified-
Good- The following stocks have good news and/or a strong technical pattern
MYGN- Prolaris test accurately predicts survival with prostate cancer according to company
AUMN - closed near a high after target price was lowered at Dahlman Rose to 85.17 from 104. Seriously.
ASTI- closed near a high after announcing a certification deal on one of its modues
WYNN, LVS- closed near their highs
CHK, ALXN, BMRN, WM- featured on “Mad Money” last night
ACTI- to be bought for $3.25/share in cash
GERN- closed near a high after enrolling the first human patient for its early-stage embryonic stem cell treatment for spinal cord injuries
PUDA- closed near a high after a brokerage upgrade
ARTW- closed near a high after posting great earnings
CFSG- closed near a high
OINK- closed near a high
JKS- closed near a high
AVP- “UK Mail” story indicates company is likely to get an acquisition offer
TQNT- raised earnings guidance
KG- to be acquired for $14.25/share in cash by PFE
Bad-The following stocks have bad news and/or a weak technical pattern
GPN- poor earnings
CTXS- closed near a low
CRM- closed near a low
FFIV- closed near a low
RE- closed near a low
AMZN- closed near a low
SYNA- warned on earnings and CEO resigned
VQ- closed near a low after updating production numbers and announcing an “at the market” offering
COCO- CEO resigned for ‘personal reasons’
FAST- poor earnings
Earnings:
TUES OCT 12 BEFORE
FAST
TUES OCT 12 AFTER
ADTN CSX INTC
LLTC
None today
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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