July 10th, 2012

Earnings Reports Season Is No Basis to Evaluate Prospects

As we’re constantly being reminded we’re going through earnings season.  Stocks announce results for the past quarter and outlook for the remainder of the year.  These announcements by company management are compared against the collective wisdom of the “brains” on Wall Street as measured by their average sales and earnings projections and based on whether these two numbers are close, the institutional holders of those stocks will either sell or rush to buy driving prices either higher or lower.

I usually find all these “Earnings Alerts” and the resulting reactions comical because I can never tell whether the “misses” resulted from the “brains” being overly optimistic or pessimistic.  Clearly, we can’t usually argue with the actual results,  so we have to assume that it was the Guru’s on Wall Street that were wrong.

But no one can argue with the very optimistic picture many longer-term stock charts are now presenting.  I have assembled a list of close to a hundred stocks where prices are close to or recently have crossed above resistance levels that extend back 5-10 years.  Every day, new names join the group of stocks that have succeeded in making the cross over into new high territory, some 4-5 year new highs and some all-time new highs.

Without revealing too much information that Members receive in their subscriptions, I offer the following post I shared with them on June 10:


Last January, I posted a piece entitled “Is the Secular Bear Market Close to Ending?” in which I included 18-years charts for WMT, MSFT, AMGN, QCOM, DIS and IBM. These weren’t pretty pictures (click on the above link to see those charts). The price of each of these large cap stocks was constrained under a ceiling that went back to the 2000 Tech Bubble Crash. I concluded that


“What we’re all waiting for are stocks like IBM to breakout because when more do, we’ll be certain that the 12-year secular bear market will have ended.” Since then, DIS and QCOM have joined IBM at being able to penetrate, just barely, those ceiling prices levels.”


This past week, WMT crossed above that long-term ceiling (click on image to enlarge):

Biotech and other healthcare stocks are among those leading the market so I suspect that AMGN won’t be far behind in being able to cross above that long-term hurdle:

If you’d like to learn more about these stocks and others, join the Membership site below.