All eyes focused on earnings | stockbee


All eyes focused on earnings

With several big cap companies announcing earnings this week, the market focus is on earnings. The market is in standstill territory. Number of breakouts dropped sharply to 82. The number of stocks up 50% or more quickly retreated to 9. The rally from the February sell off has been characterized by this kind of lukewarm momentum. No readings are yet at extreme levels, but the rally has lost vigor.

The Investors Business Daily Big Picture column has all along been lukewarm about this rally. Several time it has pointed out that this rally is not really driving the leading stocks up and has been advising caution. The Big Picture market analysis is consistently good and I factor that in my Market Monitor analysis.

Another Indicator I track is the McClellan Summation Index.

Currently the readings are at 2300. The Summation Index is a long-term breadth indicator which oscillates in relation to a Zero Line. The normal range of movement is between Zero and +2000. Movement below the Zero Line is considered bearish, while movement above +2000 is considered bullish. Historical extremes are approximately +4000 and -2000. Generally at 2000 plus level the number of stocks up 50% or more is in 20 plus territory. So this rally has number of divergences. Rally should accelerate according to many readings at this level but it just keeps stalling and moving in slow crawl.

Some of these things are behind my reducing exposure and tightening stops.

Market Monitor

Total 4% plus bullish breakouts = 82

Total 4% plus bearish breakouts = 53

65 day bullish/bearish ratio = 957/231

Stocks up 50% or more in a month = 9

Stocks up 25% or more in a month = 110

Number of stocks with 100% plus move = 427

Number of stocks up 200% or more = 88

4% plus signals for 100plus universe = 18

4% plus signals for 200plus universe =7

Stocks up 4% or more from 100% plus universe:

CTCH,Commtouch Software Ltd (Google  Yahoo  Earnings  Chart
DRYS,Dryships (Google  Yahoo  Earnings  Chart
GIII,G-III Apparel Group Ltd (Google  Yahoo  Earnings  Chart
GSOL,Global Sources Ltd. (Google  Yahoo  Earnings  Chart
INSW,Insweb Corp (Google  Yahoo  Earnings  Chart
IOC,Interoil Corporation (Google  Yahoo  Earnings  Chart
MIVA,MIVA Inc (Google  Yahoo  Earnings  Chart
ONSM,Onstream Media (Google  Yahoo  Earnings  Chart
PRGX,Prg-schultz Intl Inc (Google  Yahoo  Earnings  Chart
PTSX,Point .360 (Google  Yahoo  Earnings  Chart
SCLD,Steelcloud Inc (Google  Yahoo  Earnings  Chart
SMSI,Smith Micro Software Inc (Google  Yahoo  Earnings  Chart
SYNL,Synalloy Corp (Google  Yahoo  Earnings  Chart
TRT,Trio-Tech Internat (Google  Yahoo  Earnings  Chart
TZOO,Travelzoo Inc (Google  Yahoo  Earnings  Chart
UCTT,Ultra Clean Holdings (Google  Yahoo  Earnings  Chart
XING,Qiao Xing Univ Telephone (Google  Yahoo  Earnings  Chart
ZIXI,Zix Corporation (Google  Yahoo  Earnings  Chart

Trade Selection based on previous price action. (Consolidation or weakness prior to breakout)
INSW,Insweb Corp (Google  Yahoo  Earnings  Chart
TRT,Trio-Tech Internat (Google  Yahoo  Earnings  Chart
TZOO,Travelzoo Inc (Google  Yahoo  Earnings  Chart
XING,Qiao Xing Univ Telephone (Google  Yahoo  Earnings  Chart

Now you know how to find stocks which make 100% plus move before they make it to 100% plus move. Just look at INSW. INSW was just a trailer, the main movie is yet to start. If you keep your eyes open you will find many such moves during "the risky", "to be avoided" earning season.

INSW also shows vividly how liquidity flows in in minutes when there is a catalyst. INSW traded 0, shares on one of the days this month (4/3/2007). It traded 3 million shares today. Studying liquidity of a stock over its lifetime can tell you a lot. The most important thing you will learn is how not to set volume filters. Catalyst brings liquidity. Often if the catalyst has long term impact the liquidity will persist for days or months or years after the one day move. That is the way market works.

All most all the leading stocks for 2007, which people would rave about and marvel at how did this stock make 1500% plus move, start with earnings acceleration. Some Episode in the life of a stock has enough fuel to propel it in to next orbit or send it flying for a 1500% plus move. The most common and easily identifiable one out of them is earnings and sales acceleration.

Study of Episodic Pivot can lead to many profitable trades.

Later: How I trade earnings on stocks with analyst


JS said...

Is it possible for you to publish stock list each day that have Episodical Pivots, alongwith "Double Trouble" and the "Market Monitor"? It will be nice to see this list daily, since per your observations, stocks having this event, normally trend higher (GT,RSH) etc.


Roscoe said...

This is the most enlightening thread i have ever read. The concepts are so so unique and refreshing. Thanks for taking the time to post all this information for free. Your benevolence shines new life into this broken trader.


Pradeep Bonde said...

Will try to do that.


JS said...

Really appreciate it. You have indeed made the art of making money simple, although I must say I am still digesting all of your pointers. In the case of JADE, it came up on your "Double Trouble" scan a few days back. What do you suugest should one look for a good entry point for stocks making the cut in your "Double Trouble"list? JADE was down on Fri,Mon, flat on Tue and has taken off today. Is there any thing you look for before jumping in? Looks like I missed it, even though I had it on my watch list.

Again, thanks for your help.

Pradeep Bonde said...
It is a buy at open next day of signal.
There are no other criteria. It was up more than 4% on Friday.