The Driving Force Behind Stock Prices

  • April 27, 2004
  • Tim Truebenbach


The Nasdaq posted a day of distribution once again today, as it closed
lower on heavier volume than yesterday. One fact remains, despite all of the
uncertainty surrounding the market with Iraq, politics, terrorism and
interest rates: Corporate earnings are getting better and better as the
economy gets stronger and stronger. Investors discovered long ago that
earnings are the driving force behind stock prices and this time will
inevitably be no different.


image src=”https://tradingmarkets.com/media/2004/Tim/tt042704-01.gif” width=”418″
height=”336″ />


image src=”https://tradingmarkets.com/media/2004/Tim/tt042704-02.gif” width=”418″
height=”336″ />

Will stocks run away? Probably not. In fact, the strongest stocks in the
market which currently appear to be coming from the Unternet group and
medical sector are not even doing that. Genentech and
Ceradyne both enjoyed nice gains but have quickly been
reeled in


image src=”https://tradingmarkets.com/media/2004/Tim/tt042704-03.gif” width=”418″
height=”336″ />


image src=”https://tradingmarkets.com/media/2004/Tim/tt042704-04.gif” width=”418″
height=”336″ />

^Next^

 

In consideration of these two names along with others such as Bradley
Pharmaceuticals and Ebay ; growth stocks
have been making headway but remain very volatile. Obviously, simply going
and buying any stock into a pullback can be risky because what you get on
your hands can always look like RF Micro or World
Acceptance .


image src=”https://tradingmarkets.com/media/2004/Tim/tt042704-05.gif” width=”418″
height=”336″ />

One of the best ways to play growth has been to move into a select name or
two at the beginning of a rally in the overall market and be diligent in
taking profits off the table rather quickly. Extended runs don’t exist right
now. Yahoo! broke out of a double bottom base at the end
of March. Initially, it made a move of less than 5% before coming out with a
nice earnings surprise. Since that surprise, it has added maybe a dollar or
so.


image src=”https://tradingmarkets.com/media/2004/Tim/tt042704-06.gif” width=”418″
height=”336″ />

I mentioned Yahoo! because it has been one of the stronger and more
consistent performers in this market for over a year now. It also shows that
the action is nothing similar to that of the Bull Market in the
1990s…even the early 90s.

Keep a watch list handy of names that are setting up and keep tabs on the
overall market. Rather than individual stock leaders, we are seeing the
market itself produce the leadership. Market weakness may be an opportunity
to seek out leading ETFs and Holders on strong sectors or the indexes
themselves. The Nasdaq, for example, is currently setting up in a
cup-and-handle formation which it may break out of if earnings have their way
and the upside is to continue.

Until Thursday,

Tim Truebenbach