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Strategies & Market Trends : Befriend the Trend Trading -- Ignore unavailable to you. Want to Upgrade?

To: ratan lal who wrote (13704)	12/4/2000 5:05:04 AM
From: Walkingshadow	Read Replies (1) \| Respond to of 39683

ratan, That depends on many things, including past history of earnings reports (which affects expectations of impending reports). Stocks reporting upside surprises frequently do so again and again in subsequent reports, and this becomes the expectation, and is priced in going into earnings. Sometimes there's an "anticipatory upswing" going into earnings, which if only moderate, typically results in an extended (over two weeks) rally in the stock if there is an upside surprise. But if this pre-earnings upswing is excessive (i.e. 10% or more in the two days prior to earnings or so), then the "buy on the rumor, sell on the news" scenario becomes more likely, even if the consensus number is beaten. Clues can often be gleaned from pre-earnings volume and technicals, which will give you an idea of how much interest the momentum crowd has, who typically will drive the "sell on the news" part. It is also important to know what the "whisper" earnings number is, if possible. Whisper numbers tend to be more accurate than analysts estimates, particularly with respect to high-flying techs. But, most often, this too gets priced in pre-earnings, at least to some extent. These things only apply to positive earnings reports, which for most of the high-flying techs means they not only have to beat the Street, but must beat it by a significant amount. Anything else, and the stock will get hammered. This is usually the case, even during times when the market is rallying, and the future outlook for the stock in question is excellent, and there are no forward earnings concerns. None of these is operative now. In the case of CIEN, there has been some (though limited) history of beating estimates. But, this time, it appears fairly likely that they will not beat estimates and in fact will probably not even meet estimates. I suspect this will precipitate a big selloff, particularly if combined with a forward warning, as we've seen so often this quarter from others. Recent revenue concerns with CIEN, which some analysts have tried to downplay, lead me to suspect that soon, maybe during the earnings announcement, CIEN will issue revised earnings guidance going forward. Regards, WS