Even though we’re still in the “official” earnings season, the economy may hold the trump card. Well, at least it will on Friday. That’s when the April jobs numbers comes out. And the pressure will be on.
Yes, confidence is up, home prices and sales are strengthening, GDP is recovering, and consumers are spending. But unless the labor numbers verify and confirm this good news, all may be for naught.
The market is skittish right now. Look at what the Greek crisis is doing to U.S. stocks. The Goldman Sachs (GS) mess is reviving fears that the financial crisis has other shoes to drop. Stocks have been stagnant for the past three weeks. So, the market needs a strong jobs number.
Turning to earnings, this week will be another busy one, although we’re past the peak of the season. More than 90 S&P 500 (SPX) companies will take the turn at the earnings plate next week, but star power is lacking. With Time Warner (TWX), Kraft Foods (KFT), Pfizer (PFE), Marathon Oil (MRO) and Merck (MRK) among the more recognizable names, the week probably won’t excite the casual viewer. But there’s plenty to chew on from a trading perspective.
As far as sectors, oil and gas companies pepper the list with such names as Anadarko (APC), Devon (DVN), XTO Energy (XTO), EOG Resources (EOG) and Tesoro (TSO).
Utilities are also popular, including Duke Energy (DUK), PG&E Corp. (PCG), Sempra Energy (SRE), Consolidated Edison (ED) and PPL Corp. (PPL).
And real estate with Vornado (VNO), Public Storage (PSA) and Kimco Realty Corp. (KIM). Perhaps of greater interest is the homebuilder sector, which gives us Pulte Homes (PHM) and D.R. Horton (DHI).
Like we said, there’s little in the way of headliners on the list, but plenty of tradable opportunities. Let’s look at a couple.
The table below includes a slice of the action this week, with earnings report dates and what analysts currently expect for profit growth (compared to the same quarter a year ago). We also include a relevant moving average so you can see potential support or resistance (duration in days is in parentheses).
We give an idea of the overall sentiment toward the stock based on our various indicators. Keep in mind that optimistic sentiment represents higher expectations and, thus, can create some vulnerability if those expectations aren’t met. Conversely, pessimism reflects lower expectations that often lead to upside earnings surprises.
And we’re adding the Earnings Risk Index (ERI) score. This proprietary filtering tool ranks stocks from 1 (most bullish) to 5 (most bearish) based on a number of technical, sentiment and earnings-related factors. ERI is an added benefit for Winning Edge subscribers, as we now send out reports on changes in ERI scores, especially for stocks that became “1s” or “5s”.
Here’s the table for this week:
It appears Kraft Foods (KFT) is your best bet for a bullish options trade, while Public Service Enterprise Group (PEG) might make a good short trade.
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The Key to Money-Doubling Option Trades This Earnings Season
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