Each quarter, I try to do a little write-up about earnings at one point or another. With Alcoa (AA) kicking off the unofficial start to the 4th quarter earnings season yesterday, it’s as good a time as any to view and review. Two years ago this quarter, investors were worried about the solvency of the very companies they were investing in. As time progressed, stocks would rally if a company posted decent revenues. Then it was revenue growth. Then earnings began to be re-looked at. Then finally in the last quarter or two, investors were concerned with genuine earnings beats/misses as well as forward looking growth. And now here we are in January 2011, some 90% or so off of the S&P 500 bottom. Part of the reason the market has gone up so much is the belief that things will get better. But since a stock market is a forward looking creature, it tends to price in expectations. Not always, but a lot of the time. We as day traders attempt to seize on the inefficiencies of course in said pricing and these occur particularly in the likes of the earnings season we’re about to embark upon. Now, the market wants to see good revenues, good earnings, good revenue growth, and good earnings growth. Furthermore, one of Wall Street’s dirty little secrets is that analysts often leave some wiggle room, i.e. if they think a company will earn 47 cents a share, they may say they think the company will earn 43 cents when they send in their estimates to the various earnings entities. Thus, if a company earns 43 cents in “meeting” estimates, it’s often viewed as a miss” in bull markets such as the one we’re in. Thus, as earnings season cranks up, be aware that companies better beat and raise in most cases else their stock price will suffer whereas a handy beat and raise of guidance can cause a short covering stampede.
Markets overnight were stronger throughout the world with Hong Kong up 1% with the gains every bit as good if not better in Europe with Paris up 1.1% and London ahead 1.3%. The dollar is marginally stronger, oil is up ½%, gold is up almost 1%, and bonds are down a tinge. Wholesale inventories are out at 10AM (0.9%). The overall tone of trading remains quite positive as Portugal indicates they don’t need bailout money. Futures are correspondingly up very nicely. For the day, the gains will likely hold although be a bit capped amid a relative dearth of news flow ahead of what is expected to be a major snowfall tomorrow in the New York area. The focus will likely be on the education stocks following APOL’s earnings, big-cap tech in the news such as AAPL, the earnings plays among the retailers such as TIF and TLB, and relative strength/weakness plays.
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
AAPL- closed near a high amid rumors of an imminent deal with VZ
AUXL- closed near a high after raising revenue estimates
FCX- closed near a high after being upgraded at Stifel Nicolaus
FSLR- closed near a high
REDF- closed near a high
MAKO- closed near a high after reporting selected 4th quarter data
LDK- closed near a high after raising sales estimates
SLE- closed near a high amid takeover speculation
APOL- great earnings
SYK- raised earnings guidance; ZMH may move with it
NVDA- entered into a patent cross license agreement with NVDA and will receive $1.5 billion in technology licensing fees of $1.5 billion
ASTM- closed near a high
JKS- closed in a high
AXL- closed near a high after announcing a joint venture with Sona Koyo Limited
JAZZ- closed near a high
ACOR- closed near a high after raising Ampyra 4Q guidance
CIEN- featured on “Mad Money” last night
APKT, NTGR, CRUS, OTR, AKAM, ARMH, NI- mentioned on “Mad Money” last night in a mobile Internet segment
NUVA- raised 2010 and 2011 guidance
PRM- exploring strategic alternatives
TIF- raised earnings guidance
SHLD- raised earnings guidance
LEN- good earnings
Bad-The following stocks have bad news and/or a weak technical pattern
AIG- closed near a low
CPLA, EDMC- closed near a low after STRA warned of declined enrollment
MWE- share offering
GEOI- share offering
AA- lukewarm earnings due to a miss of revenue guidance
CKSW- poor earnings guidance
JOE- received informal SEC inquiry
AMD- CEO resigned and warned on guidance
TLB- warned on earnings guidance
SVU- poor earnings
Earnings:
TUES JAN 11 BEFORE
LEN SVU
TUES JAN 11 AFTER
None today
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
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