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How to Trade Tuesday's Earnings: Goldman Sachs, JPMorgan and More

NEW YORK (TheStreet) -- It is extremely important that investors and traders understand the risk/reward for a stock both before and after a company reports quarterly earnings.

So far in 2014 the Dow Jones Industrial Average is up just 2.2%. Among the index's components, Goldman Sachs (GS - Get Report) is down 7% year to date, while Johnson & Johnson (JNJ) is up 15% and JPMorgan Chase (JPM - Get Report) is down 4.6%. These three are among the stocks slated to report earnings before the market opens Tuesday.

Also scheduled to report is regional bank Comerica (CMA), which is up 6.2% so far this year while the regional bank index is up just 2.5%. Community bank Bank of the Ozarks (OZRK) is up 16%, while the ABA Community Bank Index is down 1.4%

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The Dow Transportation Average is up 12% year to date with component JB Hunt (JBHT) down 4.4%.

These pre-earnings volatility differentials are the reason investors and traders need to focus on my two "Crunching the Numbers" tables, which provide current readings for both stock-specific fundamental data and simple readings of technical analysis.

The most important parts of the second table are action levels: value levels at which to buy on weakness and risky levels at which to sell on strength.

Let's take a look at the stock profiles: All six companies report quarterly results before the opening bell on Tuesday.

Comerica ($50.47) traded as high as $53.50 on March 21 and as low as $45.34 on May 15, when it tested its 200-day simple moving average, which is now up to $46.91. Analysts expect the bank to report earnings per share of 76 cents. The company's 12-month trailing price-to-earnings ratio is 16.6 with a dividend yield of just 1.6%.

The weekly chart is positive with a five-week modified moving average at $49.75. Semiannual value levels are $45.34 and $41.89 with quarterly and monthly risky levels at $53.31 and $53.70, respectively.

Goldman Sachs ($164.80) has been trading back and forth around its 200-day SMA since Feb. 3 and closed Friday just above this average at $164.76. Analysts expect the investment bank to report EPS of $3.07. The stock's 12-month trailing P/E ratio is 13.1, and its dividend yield is just 1.3%.

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GS $164.11 0.00%
JPM $63.20 0.00%
AAPL $93.74 0.00%
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