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.

PDO, NCOC
FUQI, NSYS, TYM, PNTR
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.

SUTR, NED
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.

ANW, MEA, GXDX, JRJC
VLNC, MA, SBLK, MORN
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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