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TheStreet Open House

Investing Ahead of Earnings: Johnson & Johnson and Coca Cola

NEW YORK (TheStreet) -- It's still early in first-quarter earnings season, but it looks like companies that beat analysts' earnings estimates and spike higher are going to have a hard time holding on to those gains.

For example, Wells Fargo (WFC) beat EPS estimates before the opening bell Friday and initially traded higher but later faded to its 50-day simple moving average.

Many companies have taken advantage of the low cost of borrowing and have increased debt significantly. I read a story over the weekend that stated that corporate debt is up $1 trillion since the end of the Great Recession. Corporations have used this cash in stock buyback programs, which increases their earnings per share.

Another positive catalyst (at least initially) for stocks has been the announcement of additional cost-cutting. For example, Family Dollar (FDO) missed EPS estimates by 10 cents a share before the opening bell on Thursday but initially traded higher on the announcement that the discount retailer would be closing 370 underperforming stores. Nevertheless, the stock ended the week by setting a 2014 low.

Today's "Crunching the Numbers" tables cover the four stocks profiled below. Following the profiles, the first table provides the five major moving averages and stochastic readings. The second table provides earnings estimates, value levels at which to buy on weakness and risky levels at which to sell on strength.

Johnson & Johnson (JNJ) ($96.87, up 5.8% year to date): Analysts expect the health care giant to report earnings per share of $1.48 before the opening bell on Tuesday. The stock traded to an all-time intraday high at $99.38 on April 4 and is above all five moving averages shown in the first table.

The weekly chart is positive but overbought with its five-week modified moving average at $95.21. Monthly and semiannual value levels are $90.72 and $83.76, respectively, with a weekly pivot at $97.31 and a quarterly risky level at $100.42.

Coca Cola (KO) ($38.63, down 6.5% YTD): Analysts expect the iconic beverage company to report earnings of 44 cents per share before the opening bell on Tuesday. The stock traded as low as $36.89 on Feb. 20 and then could not sustain a gain above its 200-day SMA at $39.19 on April 10.

The weekly chart is positive with its five-week MMA at $38.53. Monthly and weekly value levels are $37.80 and $37.73, respectively, with quarterly and semiannual risky levels at $41.28 and $44.67, respectively.

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