Monday down. Tuesday up. Wednesday up, then down, then back up again -- big. Thursday, down over 0.5% for each of the major averages at midday.

Welcome to earnings season.

It may seem there is no rhyme or reason to how individual stocks respond to earnings reports. If you have been frustrated trying to make sense of it, you are in good company. Many traders have found gaming quarterly announcements to be a futile exercise. My own personal approach is that without some sort of an edge, I'd rather simply not play .

There are two keys to tracking earnings reports and the way a stock will trade afterward. The first is the expectations for the company's quarter. Not your expectations, rather the collective anticipation of analysts and fund managers for what the company will report and say during its conference call.

But playing the expectation game is only the first step. Once you determine how high the bar is set, you must then consider the stock's recent action. Some results are anticipated well in advance of the conference call. A quick look at a chart is often instructive.

We won't bother discussing a company like Kodak ( EK), whose business has been eroding for a long time. The company simply missed its numbers. I'd rather look into why Citigroup ( C) disappointed. There are two explanations worth exploring; depending on which one you prefer, one makes these stocks a hold, the other a sell.

Some have blamed Citigroup's disappointment on the General Motors ( GM) blowup. If you believe that's the case, then Citi's problems are probably behind it, and you can hold it until October's report.

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