Earning season has always been my favorite time of the year; especially right after the holiday quarter. Before we get started I would like to state trading around earning is high, risk high reward. I will be using past earning events, charts, recent news and a little common sense to make these trades.
This will be the first of several articles to come. Each week I will start with the previous weeks performance, then transition into the new plays for the week.
First up on Monday is PPG Industries Inc. (NYSE:PPG). The stock has been on a rampage as of late and is not looking as promising as I once thought for an earning play. I had a position of $5000 near the 125-130 level and with the stock trading in the 140's cut it in half leaving only $2500 to hold through earnings. PPG has a consensus estimate $1.54 and will have to not only meet but also raise it's guidance in order not to take a hit on Monday. If it does this, I will hold my position. If it only meets guidance I am afraid it will fall Monday morning. If this is the case I will let the stock settle and then add back my full position.
JP Morgan Chase (NYSE:JPM) is next up on our list; reporting Wednesday before the bell. After seeing how Wells Fargo & Co. (NYSE:WFC) reacted after a strong quarter, I anticipate the same reaction to JPM. If we see WFC start to rebound throughout the week the plan is to wait and see if JPM reports and add a position to snag a few % on a rebound. I might also take the chance to play a similar rebound in Bank of America (NYSE:BAC). This is much riskier as it has already rallied over 100% and I think is due for a pull back to regain its momentum.
Next up we have Ebay Inc (NASDAQ:EBAY). This stock has also been trading quite well the past month. If I have a chance to pick some up in the low 50's before earning I will allocate between $5,000-10,000 (depending on the price). This one is risking with the P/E over 18; but if we see the same outcome as last quarter we can grab 5-8% and close the position. After which I think we will see a sharp pull back where we can then reenter and pick up additional upside. A long position will be kept in this stock after a pull back as I think Paypal will continue to drive EBAY up sharply in subsequent quarters.
Last up for the week we have General Electric Co. reporting Friday before the open. After last quarter GE has pull back significantly and with a P/E just under 16 it's time to buy again. The consensus estimates here are only $0.43, $0.04 higher than the same quarter last year. This should be an easy beat for the company as the economy continues to recover and I think we see a positive outlook for 2013. A $7,500 positional will be in place on any pull back before Friday.