Notable Earnings: July 20th Before the Bell

Another busy day tomorrow for earnings and my list of notable earnings continues to grow!.. so I’ll break it up into two posts once again (before and after the bell).  8 companies will report before the bell tomorrow, with Vasco Data Security (VDSI) leading the pack as the highest ranked company in the database reporting in the morning (with a score of 54 out of 60). 

Technically, the stock looks outstanding with very good buy volume in the right said, followed by a breakout and subsequent orderly pull back to support of the 50 day moving average twice.  A good earnings report could propel the stock off support, possibly providing a nice entry point if you missed the initial breakout.

Other notable earnings before the bell:

  • St. Jude Medical (STJ): A solid company that continues to post solid results quarter after quarter.  The stock broke out on June 24th and remains just outside of a proper buy range.
  • Lufkin Industries (LUFK): The stock of Lufkin, an oil equipment company, continues to soar to new heights as earnings and sales growth continues to accelerate.
  • ATMI Inc (ATMI): Semis have done well recently and ATMI is no exception – looks outstanding technically, but well above a proper buy range.
  • Ametek (AME): Ametek, a global manufacturer of electronic instruments and electric motors, has been tracking along the 50 day moving average for 2 years and looks ready to bust out to big gains from a base at any moment.  Perhaps tomorrow’s earnings report will be that catalyst.  The stock currently sits in a buyable range.
  • Astec Industries (ASTE): Designer, engineer and manufacturer of equipment and components used primarily in road building and related construction activities.  Astec is currently working on a base on base pattern after orginially breaking out in March.  The technicals are a bit suspect.
  • Labor Ready (LRW): Capitalizing on the improving job market, this is a stock that continues to soar to new heights and well out of a proper buy range.
  • Symyx Technologies (SMMX): A provider of research services and high throughput experimentation for the discovery of innovative materials, has experienced record growth over the past year and is currently forming the handle of a long base.

Notable Earnings: July 19th After the Bell

Earnings continue to come in very strong – several of the companies that reported this morning are surging today: Genlyte Group (GLYT) is up over 5%, Peabody Energy (BTU) is up over 4%, Jefferies Group (JEF) is up 5%, Lone Star Technologies (LSS) is up 7% and Precision Castparts (PCP) is up nearly 9%.

The big names (Amgen, Yahoo and Intel) will report after the belll today, which should provide movement for the markets tomorrow (at least in the first hour or so of trading).  While the big names get most of the attention, it’s the smaller, faster growing companies i’m most interested in.  The highest rated company in the SelfInvestors.com database reporting after the bell today is USANA Health Science (USNA), which develops and manufactures science-based nutritional and personal care products.  It ranks 51 (out of a possible 60).  Although sales growth has been decelerating for several quarters, it’s still very good at about 25% quarter over quarter. 

Over the past few months, USNA has carved out a real nice looking base, with volume drying up at the bottom, then surging as it forms the right side.  Looks like the stock is attempting to form a handle.  Maybe earnings tomorrow will be the catalyst for a breakout from a short handle?

Other companies reporting after the bell today:

  • Juniper Networks (JNPR): Juniper has made an impressive comeback after the tech meltdown, in which they’ve been consistently doubling sales and earnings quarter over quarter for the last year or so.  Technically it looks very good as well and is above major support levels.
  • Gilead Sciences (GILD): Biotech has been red hot and GILD is no exception, running up over 30% in the last couple months.  The stock is currently too extended from a proper buy point.
  • CR Bard (BCR): CR Bard is a solid medical device company, although sales growth has been decelerating and posted quarter over quarter sales growth of 11 and 9% respectively in the latest 2 quarters, a bit on the light side.  The stock looks to find support at the 200 day moving average as it carves out a new base.

Forgot to mention the report out of XTO Energy (XTO) this morning:

  • XTO is a highly rated oil company that posted fantastic earnings this morning.  The stock currently sits in a buyable range, but the base is a bit suspect with a sharp V like pattern.  The stock is up 1% today.

Notable Earnings For July 19th: Yahoo, Intel, Amgen, Ventana, USANA…

Earnings season is really beginning to ramp up and tomorrow will be the busiest day yet.  IBM reported stellar reports after the bell today and earnings reports from big names like Yahoo, Amgen, Intel and Juniper will come tomorrow.

Morning Reports:

The big guys will report after the bell, but a slew of lesser known names will kick things off in the morning.  Two companies I’ll be watching with interest are Ventana Medical Systems (VMSI) and Peabody Energy (BTU).  I have VMSI as the highest rated company reporting tomorrow with an overall rank of 52 (out of 60).  However, the stock has already had a tremendous run and technically looks a bit shaky here.  It’s probably due for a correction and tomorrow’s earnings report may just be that catalyst.  We shall see.  Ventana Medical Systems, Inc. develops, manufactures and markets instrument-reagent systems that automate slide staining in anatomical pathology and drug-discovery laboratories worldwide.

Another company I’ve got my eye on tomorrow morning will be Peabody Energy (BTU).  The coal producer has seen accelerating growth in recent quarters and continues to look good technically despite recently breaking out of a late stage base.  The stock is currently extended from a proper buy point.

Other companies reporting in the morning include: ARMHY, GLYT, RVSN, PCH, LSS and JEF.

I’ll take a quick look at all the companies reporting after the bell on Tuesday, July 19th in a post tomorrow morning. Remember: Be cautious during earnings season. 

A Discussion Of The Most Difficult Part of Trading – When to Sell Your Stock

Question:

I am struggling a bit with my profit taking sell rules.  I do pretty
well selling positions that aren’t working to keep my losses small.
However, I have trouble holding on to my winners.  I either sell to
early wanting to bank that profit (especially after a few losses in a
row) or watch a winner turn into a breakeven or small loser (I try to
limit my winners from becoming big losers).  I am trying to do the
O’Neil 3 to 1 thing but find many of my purchases never quite make it to
the ~20% level before they correct.

Do you have specific sell rules?

Any ideas in this area would be much appreciated.

My Response:

It’s a good question – selling to take a profit is the most difficult part
of investing because there are so many if’s, and or buts.

Honestly, I don’t have specific sell rules but do follow certain guidelines
you’ll want to consider:

1. I almost always sell before an earnings announcement

2. Typically, you’ll want to lock in profits around 20 – 25% in a strong
market, but towards the end of a bull run or in an iffy market, consider
taking profits at 15%.  So instead  of a (20% – 25% to 7%-8% ratio) use a
(15% to 5% ratio).  If you look at my model portfolio, you’ll notice that
the average gain is around 15.5% and the average loss around 5.5%.  Maybe
consider taking profits at 15% while keeping losses small.  You can be right
less than half the time and still do very well.

3.  Did the the stock break out with force and run up quickly then
consolidate quietly?  Is it still exhibiting good price and volume action
(heavy buying, light volume selling).  If so, this could be a big winner for
you and you may want to hold out for profits more than 20 – 25% in a
strong bull market.

4. Look for a change in trend of price and volume as a signal to lock in
gains.  A good example is CBG, a current Model P. holding.   Beginning July
5th, buy volume began to subside as it edged higher.  Of course in hindsight
I should have locked in that 20% profit right then and there.  At the time I
was thinking that post holiday trade was skewing the volume a bit and high
volume selling hadn’t yet appeared.  Now that they have appeared I am
looking for an exit point, preferably around 45, if it can get that far.  I
still have a decent chance of locking in 15% profits before earnings.

5. Don’t forget to pay attention to upward trend lines as well as prior
resistance points as well.  They can provide good predeterminded sell
points.  A good example of this is DCAI, another current holding in the M.P.
This is a stock that has carved out a deep base, with resistance at the high
in the left side around 35.  Would I continue holding if it hits that high?
No, I’m taking very nice profits off the table.  Deep bases have a much
higher failure rate, so it’s unlikely that DCAI gets to 35, carves a nice
handle and shoots to the moon. I’m just looking for a nice run in the right
side and unloading.

Selling is somewhat of an art form and you will never be perfect.  If you
can keep losses small and maybe move your profit target closer in a bit, you
will be successful.

I have certainly had my share of blunders.  In 2003, I took a quick 50% gain
in TASR, that cost me 10’s of thousands in the long run.  At the beginning
of this year, I let large gains in DHB, XXIA and TASR slip away in the Model
Portfolio and have been chipping away all year to recover those losses.  It
is important to track your trades and learn from mistakes.  Be flexible and
adjust.

I think you’re on the right track, just a few minor adjustments.

Member Response:

Thanks.  I agree selling is the most difficult but probably the most
important as well.  I have tried to adhere to the 3 to 1 mantra but most
of my stocks purchased have corrected before they hit the 20% range and
then I hold on too long for either a small loss or gain.  I have more
recently been willing to take 12 – 15% gains but then feel my stops
become a little too tight and get stopped out of good trades.

I have since widen my stops a bit but try to keep losses to 4 – 5% and
then take 10 – 15% gains, especially in a less than raging bull. 

Do you see value in a 1st level profit target where you would sell 75%
of your position and a 2nd profit target to sell the remaining 25%?  I
have always talked myself out of this type of selling but know
evaluating the merits again.  What are your thoughts?

My Response:

If you’re buying at the correct time, cutting your losses at 5% should keep
you in the majority of trades, provided you have good entry points.  Maybe
take a look at your entry points and the quality of the base?  I’d be happy
to take a look at a few if you’d like.

I do see some value in taking partial profits depending on the situation,
but I’m more of an all or nothing trader.  This keeps the number of
positions to a minimum and keeps commission costs lower.  It really depends
on the company.  I think that the solid, established companies like an
Apple, Starbux, Google ,etc this method can be a good one for locking in
profits ahead of earnings.  For example, I will most likely take 50% profit
on Google before earnings are released (on the 21st) and let the other half
ride.  If the stock drops to support maybe I add back that other half.  If
the stock soars on the earnings, you still gain on the other half.  However,
with more volatile, unestablished companies, the best option is to usually
sell ALL before an earnings report.

Generally speaking, I think it’s best to avoid getting too cute with
selling.  If you have the solid 20% gain, take it… ALL of it.  Just
remember the signs of what to look for with the potential big winners, which
might provide larger gains.

Notable Earnings for July 14th

There are several earnings reports to keep an eye on tomorrow, all coming before the bell or soon thereafter.  The one I’ll be watching closely comes from United Health Care (UNH).  The managed health care companies have had a tremendous run over the past few years and the earnings and sales growth aren’t likely to slow anytime soon.  I’ve been holding Wellcare Health Plans (WCG) in the SelfInvestors.com Model Portfolio for the past few months and the report out of UNH will undoubtedly have an affect on this and other HMO’s tomorrow.  It’s been a steady climb for UNH as the stock has cotinued to find support at the 200 day moving average and most recently at the 50 day moving average.  It looks like it will test that level once again tomorrow.

Two companies that recently broke out of great looking bases will also report tomorrow – MDC Holdings (MDC), a home builder and Monro Muffler Brake (MNRO), a provider of under – car repairs and tire service.  Both companies exhibit outstanding fundamentals as well. 

Also reporting tomorrow are two fast growing banks, one of which was highlighted in the last Breakout Highlights reportHDFC Bank (HDB), India’s fastest growing bank (time of reporting for HDB could not be verified – it’s difficult to get reliable earnings info for ADR’s) and Commerce Bancorp (CBH), a leading bank on the east coast which is attempting to carve out the right side of a year long base.

Finally, Genzyme (GENZ) will report before the bell tomorrow .. a solid company in the same league as Amgen (AMGN) in terms of fundamentals, but RS has been lagging for a couple years below 60.

My Response to Confusion About Trading In the First Hour

My Response:

Just wanted to discuss trading in the first half hour a bit so there
isn’t any confusion about my strategy.  If you’ve been a member here for
awhile you know that I won’t make a trade in the first half hour to hour
when purchasing a breakout.  However, there will be times when making a
purchase in the first few moments of trading will be advantageous.  When
a stock breaks out and makes a significant gain (such as in the case of
DCAI which vaulted 9% yesterday), it will often pull back significantly
in the first few minutes of trading at some point  over the next couple of
days as traders take quick profits or the stock gets a valuation downgrade
from a brokerage (what I like to call a "red tag sale"!) and then recover
almost as quickly.  If you missed a breakout the previous day or were
holding out longer to make the stock "prove itself" it can allow you to get in
at a price closer to the original pivot.  So trading may occur in the first few
minutes under special circumstances.

Why not just purchase the stock at the breakout, which in the case of
DCAI would have been 24.78?  You could have purchased at this price but
I believe it would have been a riskier trade.   Considering the stock
failed to breakout successfully the first time I made the purchase, I
wanted the stock to prove itself yesterday by closing the day above the
pivot, which it did.  Sure I take the chance of the stock getting away
and missing the trade completely, but it’s a risk I’m willing to make.
There are always other opportunities.

If you look at Grupo Aeroportuario (ASR) in the first few moments of
trading this morning, you’ll see it made a similar move.  The scenario
was a bit different in that the stock was continuing the reversal at
resistance of 35 that it began yesterday, but it too returned to near
the pivot point in the first moments of trading today offering another
chance to get in.  It wasn’t a trade I made in the Model Portfolio, but
getting in at 33.25 or so would have provided a nice entry point on a
technically superior stock.

 

Notable Earnings: July 13th – All Eyes on Apple

One of those earnings reports that everyone will be watching.. yes, that’s right, it’s time again for Apple (AAPL) to report.  Last quarter, "selling on the news" led to the first correction in many months despite a strong report.  Since the stock has been carving out a base for the past couple months, the odds of a spike up in the stock come Thursday morning are much better than the last go around.  Consensus estimates call for a .31/share, but the whisper number comes in at .36 which would represent a 400% increase over the year ago quarter and continue the streak of accelerating earnings growth to 4 quarters.   Most likely, Apple would have to miss badly for the stock to break below that 200 day moving average.  If I’m in the stock I’m holding, but wouldn’t be a buyer here.  I like to wait until after earnings to evaluate a position for purchase.  Apple will report after the bell.

___________________

Another earnings report worth mentioning comes in before the bell from AAR Corp (AIR).  AAR Corp is an independent provider of products and services to the worldwide aviation/aerospace industry.  The stock has had a great run, rising around 50% in the last 4 months alone.. and for good reason.  Quarter over quarter sales growth has been accelerating in the last 3 quarters with growth of 9%, 12% and 24% respectively.  Earnings growth has been equally impressive in the same time frame with quarter over quarter growth of 999%, 999% and 114%.  Despite the recent run, the stock has yet to clear a 5 year high – the stock has been rebounding after the company lost money in ’02 and ’03.

Taking a look at a 3 year chart and you can see the recent move is the right side of a long base.

Notable Earnings For July 12th: Rocky Mountain Chocolate (RMCF), Horizon Health (HORC) and Universal Forest Products (UFPI)

I will have my eye on the earnings report out of Rocky Mountain Chocolate (RMCF) tomorrow after the bell.  It’s hard to imagine that a chocolate maker could increase more than 500% in the past two years and it looks as though there is room to run.  It’s a very small company still rapidly expanding.  The stock broke out of another base back on June 14th and never looked back, surging 40% from the breakout point. Traders are taking  profits today ahead of earnings and the stock has taken a bit of a hit today with an 7% decline on volume.

Two other notable earnings will be reported before the bell tomorrow morning – Horizon Health (HORC), a highly rated manager of psychiatric and physical rehabilitation programs and Universal Forest Products (UFPI), a leading manufacturer, distributor and and installer of lumber, composite, plastic and other building materials.  The thinly traded stock made a big move today and broke out to all time highs on very heavy volume.  Is someone expecting a blow out earnings report tomorrow?

Today’s ETF Movers: Small Caps Lead the Way

The market is following through nicely, adding to Friday’s gains.  It appears we’ll get another day of accumulation as volume on the major indices are ahead of Friday’s session.  Today, small caps lead the way as indicated by the movement in the small cap Ishares ETF’s.  As far as specific industries -technology, select emerging markets (Canada again!) and some basic materials/commodites are doing very well.  Nice move in Dynamic Materials (BOOM) today.  Add transportation to the mix as well. (Data as of 3PM EST)

Ticker Name Description Current Price Price Change %Vol Change RS % From 50DMA % From 200DMA
EWC Ishares Canada Canada 19.01 0.64 122 63 8.5 11.69
GLD streetTRACKS Gold Trust Gold 42.49 0.54 46 50 -0.28 -0.91
IJR Ishares S&P 600 Small Caps 57.44 0.97 99 60 7.51 9.6
IWO Ishares Russell 2000 Growth Small Caps – Growth 68.14 1.08 114 50 8.37 8.09
EWS Ishares Singapore Singapore 7.61 1.06 164 66 1.74 4.68
IWM Ishares Russell 2000 Index Small Caps 66.67 1.06 34 54 8.32 8.87
HHH HLDRS Internet Internet 56.61 2.18 140 54 0.98 -5.49
EPP Ishares Pacific Region International – Australia,
Hong Kong, New Zealand,
Singapore
93.68 1.36 43 62 1.9 4.96
SWH HLDRS Software Software 35.9 1.04 31 63 2.05 -0.86
EWZ Ishares Brazil Brazil 25 1.83 86 70 6.07 14.26
IWN Ishares Russell 2000 Value Small Cap Value 67.28 1.22 66 59 8.2 9.58
IYM Ishares Basic Materials Basic Materials 48.12 1.26 81 45 1.52 -1.39
IGV Ishares Software Software 39.84 1.09 347 60 3.53 2.36
BHH HLDRS B2B Internet Internet B2B 2.2 5.77 66 24 0.46 -13.04
IYT Ishares Transportation Transportation 65 1.06 194 70 2.14 0.95

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