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Strategies & Market Trends : Market Gems-Trading Strong Earnings Growth and Momentum -- Ignore unavailable to you. Want to Upgrade?

To: Jenna who wrote (1663)	1/14/2001 11:24:01 PM
From: Dave Gore	Respond to of 6445

Jenna/All: EARNINGS SEASON CONFUSION - the problem with T/A analysis in the wake of earnings reports is that there is no certainty anymore about how analysts and a stock will react after an earnings report and conf. call. Until one can reliably figure that out I really think T/A is somewhat unreliable and even unimportant around earnings season. I'd love to hear other viewpoints but recall this: Last week, I and many of you considered it a positive for the overall market to once again see the market barely punish HWP and especially GTW for poor performance and a weak outlook...but wait... Along comes ARBA and beats the street by 3 cents (i.e a whopping 150%) and even better, guides earnings growth 40% higher for FY 2001. Way above whisper numbers. But lo and behold, the stock crashes on the news falling about 8 points from the after hours and regular session close on Thursday. As far as I recall, I have rarely seen this kind of response to such a consensus-beating performance. And the stock had not even run up that far in anticipation. Very confusing. Even if some felt the PE is too high, that begs the question.....why didn't analysts downgrade the stock based on valuation prior to the earnings report? I mean, they certainly knew that they weren't going to do $1.00 per share next year. Unless there was hedge fund manipulation going on, ala probably ELNT or EXDS in December, it makes no sense. Thus we have a dilemma that no chart-reading session is going to be able to assure any of us of...that is, how will a stock respond to a better than expected earnings report and outlook? And, even, will it get killed or left relatively unscathed by a bad report? Without knowing that, investing in stocks around earnings season is somewhat of a fool's game, imho, at least until we see more reliable reactions emerge.