Thursday, May 15, 2008

Two Earnings-Related Plays for Friday, Plus A Few Others

Here are the indexes. The S&P 500 is definitely lagging the other indexes, but if it does break through the 1425 area and then the 200 day moving average, a lot of short sellers would likely be forced to cover, moving this market even higher. The Nasdaq is almost at the top of its channel and is due for a pullback, but if it could somehow break through the top of this channel, then there would also be a lot of shorts trying to cover themselves. I don't necessarily think this will happen, but this market continues to surprise. There is no doubt we are overbought and many charts are very extended, but we've been relatively overbought for a few weeks now and it hasn't mattered too much. Predicting a breakdown has been a fairly futile task for a while now, so I have to just follow the trend until it breaks. I honestly have no clue what to expect tomorrow due to the options expiration - we could be up 2% or down 2%. If we do pullback right here, as always I will be watching the volume and the short-term moving averages for support. If volume is heavier or the short-term averages don't hold, I will be looking to get out.

S&P 500, NasdaqCharts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here are some of the big movers from today. PDO just went nuts after its earnings report - I have no clue as to what it will do tomorrow - perhaps the momentum continues, but it is almost 200% above its 50 day moving average so I don't know how much higher it can go. I would never short a low-floater like this, however - that would be possible suicide. The others below had earnings-related moves - I tried to get into NSYS but couldn't for some reason through Scottrade.

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

These are two possible earnings plays for tomorrow. I entered SUTR after-hours - it had its earnings after the close today and beat the lone estimate by 5 cents ($0.21 vs. $0.16 est) and posted a 37% jump in sales. This isn't a perfect play because it has moved higher in the past month but pulled back and looks like it will gap to new highs tomorrow. NED put up an EPS of $0.20 vs. $0.05 the prior year (300% increase) - sales were up 8.5%, not as great as I would like. However, this stock has been neglected and could run a bit tomorrow.

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Here are some of the charts I am still watching as possible buys. ANW broke out on earnings today out of what looks like a cup with handle but EPS growth wasn't more than about 10%. MEA and GXDX are resting nicely, as is JRJC, although I am getting a little nervous about these China stocks after so many running higher.

Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

I assume tomorrow will be an interesting session. If nothing else, we should get an above-average day of volume, right? Best of luck Friday.

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