Tricky Stock Patterns May Give Investors a Run for Their Money This Week
The bulls remained on the sidelines last week after oil resumed its climb upward, the economy grew less than analysts expected and unemployment jumped to a four-year high in July to 5.7%. Earnings continue to remain a mixed picture as a number of companies reported disappointing quarterly results including General Motors Corp.
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PowerRating) and Nortel Networks Corp.
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PowerRating) due to higher commodity costs and slowing consumer and business spending.
With a large chunk of economic news behind investors, they will have no choice but to focus on earnings. The wrath of the credit crisis will remain on investors’ minds as they get set to hear results from MBIA Inc.
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PowerRating) and Ambac Financial Group
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PowerRating). Investors will want to see just how much the bond insurers’ business has slowed since losing their ‘AAA’ credit rating.
On Tuesday, Cisco Systems, Inc.
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PowerRating) is expected to release its fiscal fourth-quarter results after the close, and analyst polled by Thomson Financial are expecting the company to report an 8% rise in profit to $0.39 per share on revenue of $10.31 billion. Beware of this stock going into the regular session. Cisco has reversed two out of the last four sessions even though its does show a strong pattern of extending session-to-session performance on earnings announcements, posting wider next-day closing levels following 13 out of its last 20 extended-hours earnings events. On May 6, 2008, the stock rose 1.2% during evening trading after the company beat with third-quarter results. Shares reversed in the next day’s regular session, ending lower by 2.1%.
Also Tuesday, Priceline.com Inc.
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PowerRating) releases its second-quarter results after the bell. The company has also been tricky in the near term. Although shares do also show a strong tendency to widen its next day share movement following an evening earnings release, doing so for 12 of the past 18 quarters, in the near-term, the stock is mixed. Shares have seen one narrowing, one reversing and two widening patterns over the past four quarters. On May 8, 2008, the stock gained 13.7% during evening trading after blowing away the Street’s estimates. Shares trimmed their gains slightly in the following regular session, ending higher by 12.0%.
Whole Foods Market Inc.
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PowerRating) is also set to release results after the close Tuesday. The stock has been battered recently and sits near a 52-week low as shoppers stray from the higher-priced grocer and move toward larger, less costly alternatives such as Safeway Inc.
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PowerRating). As a result, analysts expect the company to earn about 11% less in its third-quarter to $0.31 per share on revenue of $1.91 billion. The company has developed a strong pattern of widening price moves between the sessions following its after-hours earnings-related events, extending its move after 13 of its past 16 earnings-related events. In the near-term, the pattern is mixed, with two narrowing and two widening events in the last four quarters. On May 13, 2008, shares tumbled 8.2% in after-hours trading following an earnings and revenue miss. Shares extended their declines the next day, dropping 13.9%.
Cassie Slane is a Senior Editor at www.MidnightTrader.com.