EARNINGS SEASON

CASH is king and CASH reigns during earnings season. No matter how intuitive you may be, if you are a trader or short term investor, why would ya hold onto a stock ahead of the earnings train. All you save is brokerage. All you can lose is the hard earned money you made during the quarter.

The furious moves that a stock can make after the earnings is a great trade by itself so its tempting to buy ahead of the earnings. And make a killing if the earnings are good. NO NO NO. It does not work like that. Three factors are a must for a stock to move higher after the earnings:
1,The earnings have to be better than the street expects and better than the whisper number which is a tad bit even higher than the street expectations. HA.
2.The stock price should not have moved up ahead of the earnings.
3.And the forward guidance or the future earnings better be good.

Thats simple. But once these three factors are taken care of, the
market has other issues that can stifle a rally. Say, the sentiment of the conference call that follows the earnings release. The buyback or lack of a buyback announcement. The revenue numbers and the estimates going forward. And so on and so forth.

Over and above the earnings... with the major indices having rallied to highs...not seen in years... this time around, I see more chances of a pullback regardless of earnings. So I am a seller on rallies rather than a buyer on pullbacks. And can patiently await more critical points to buy stock for the longer term.

Lets see how it goes. CITIGROUP reports before the market opens. The worst case will be in the numbers. Whether we get a CEO resignation is a question? The stock price action on C will guide us on how to play the financials.

Housing stocks are a safe bet. Ironical to say that when the economy recession looms on their status. But these are trading at 25% discount to their book values... and one wonders if no recovery will ever ensue. One good housing number can rock these stocks is my take. SO am in DHI at 14 and TOL at 22.5 for now.

More after the maket opens tomorrow.... just a buyer beware post ahead of the earnings. Even if the earnings are good and 4th qtr numbers are good, theres lots of issues to mull upon- like FED to cut or not to cut end of the month.... , housing recovery- to be or not to be-, Oil rally to continue or not to... , subprime woes off radar or not... TOO MANY `or not's to grapple with...

SO watching the market moves will help us consolidate our sentiments... and our money...

Read and write... Its now open to all to comment. As I learn more about the technicals of blogging, it will be more interactive, I guess. For newcomers I suggest you scroll down to the first blog to know what monas is all about. ...! We have had a stellar run since the fall of AUGUST. I am happy!