Five of the tech stocks reporting quarterly earnings this week were among the momentum leaders in 2005, but Yahoo! (YHOO) , Apple (AAPL) , eBay (EBAY) , Google (GOOG) and SanDisk (SNDK) have seen their share prices sliced by more than 20% from highs set in December through February to lows set in March.
I believe this group of five has to beat the bottom line and give positive guidance for the current quarter and remainder of 2006 to help technology stocks return to market leadership, which is needed to prevent further damage to the major equity averages.
As a group, technology is trading fractionally over fair value, after being more than 20% undervalued a year ago. The weekly chart profile for the tech-heavy
will shift to negative this week, with a close on Friday below its five-week modified moving average (MMA) at 2311. A negative signal would indicate risk to monthly and quarterly supports at 2288 and 2275. This week's resistance is 2340/2382.
The weekly chart profile for the Philadelphia Semiconductor Index, or SOX, will remain negative, given a weekly close below the five-week MMA at 511.08. Weekly support is 486.09, with a monthly pivot at 504.32 and monthly resistance at 554.09.
The following summaries provide trading levels for 10 stocks reporting earnings this week on Tuesday, Wednesday and Thursday. As a reminder, a risky level is a price at which investors are likely to reduce holdings, according to my models. A value level is a price at which my models project that buyers will emerge. A pivot is a value or risky level that has been breached in its particular time horizon, and the stock will likely trade around this pivot.
Investors should buy weakness to value levels on undervalued buy-rated stocks and on hold-rated stocks that are more than 20% undervalued. Stocks with rising or overbought momentum readings are better set up for a positive earnings report. Investors should sell strength to risky levels on sell-rated stocks and on hold-rated stocks that are more than 20% overvalued. Stocks with DM (declining momentum) or OS (oversold) momentum readings are set for a negative report.
reports earnings Tuesday, and investors should reduce holdings on strength to my monthly risky level at $26.58, or on a sell stop below my annual pivot at $23.10.
also reports Tuesday. TXN investors should reduce holdings on strength to my monthly risky level at $34.85, or on a sell stop, given a weekly close below the five-week MMA at $31.86.
After this evening's report, Yahoo! investors should consider adding to positions on a buy stop of a weekly close above the five-week MMA at $32.24.
Apple reports Wednesday, and this company's investors had the opportunity to add to positions on weakness to its 200-day simple moving average (SMA) on March 29, when that level was tested at $58.19. Apple has been trading around its quarterly pivot at $66.66, and is now below it, which is a warning ahead of earnings. Investors should reduce holdings on strength to my quarterly risky level at $74.76.
eBay investors should consider adding to positions on a buy stop, given a weekly close above the five-week MMA at $39.27. The company reports on Wednesday.
Also reporting Wednesday,
investors should consider reducing holdings on strength to my quarterly pivot at $52.98, or on a sell stop below my monthly pivot at $48.03.
delivers its earnings Thursday. Its investors should consider reducing holdings on strength to my monthly risky level at $51.93, or on a sell stop given a weekly close below my quarterly pivot at $43.29, as such indicates risk to my quarterly value level at $39.21.
investors should add to positions on weakness to my quarterly value level at $12.54. The company reports on Thursday.
Google investors had the opportunity to add to positions on Feb. 28, when the stock tested its 200-day SMA at $340.13, which was the first test of that average since the company went public. On March 23, it was announced that Google would join the
effective March 31. I expected the stock to pop to its fair value at $412.59 by mid-April, and this test occurred on April 5. Investors who took this trade captured this 21.3% move. This week, investors should add to positions on weakness to the five-week MMA at $385.10. The company reports on Thursday.
Finally, SanDisk also reports Thursday. After
was announced as a new member of the S&P 500 on Jan. 25, shares popped 18% over the subsequent three weeks or so. After Google joined the club, its shares popped 22%. If SanDisk moves up 20% on its addition, that could move the share price up to $71.36 from Wednesday's close. My monthly risky level is $72.30. Investors should anticipate an S&P 500 bounce by adding to positions if the stock stays above its five-week MMA at $59.32.
Richard Suttmeier is president of Global Market Consultants, Ltd., and chief market strategist for Joseph Stevens & co., a full service brokerage firm located in lower Manhattan. Early in his career, Suttmeier became the first U.S. Treasury Bond Trader at Bache. He later began the government bond division at L. F. Rothschild. Suttmeier went on to form Global Market Consultants as an independent third-party research provider, producing reports covering the technicals of the U.S. capital markets. He also has been U.S. Treasury Strategist for Smith Barney and chief financial strategist for William R. Hough. Suttmeier holds a bachelor's degree from the Georgia Institute of Technology and a master's degree from Polytechnic University.