CarMax, Micron, Monsanto, Texas Industries: How to Trade These Stocks Now

NEW YORK (TheStreet) -- Shares of Monsanto (MON), Micron Tech (MU) and Texas Industries (TXI) sold off with the broader stock market Friday and Monday after the three companies reported earnings that beat analysts' estimates. Today I'm going to tell how you to trade them going forward.

I profiled these three companies and CarMax (KMX) before they reported earnings. CarMax's results failed to match analysts' estimates.

The three earnings winners traded up following earnings but later weren't able to avoid the broader selling pressure.

Today we provide postearnings profiles, including two "Crunch the Numbers" tables to help investors navigate stock-specific share price volatility.

Our first table (on the next page) covers each stock's technicals, including five important moving averages and updated readings on the 12x3x3 weekly slow stochastic for each stock.

To review, 12x3x3 weekly slow stochastic is our measure of momentum, which tracks weekly highs, lows and closes over the last 12 weeks. Stochastic readings rise in a positive trend when weekly closes are closer to the week's high, and tend to begin to decline when weekly closes are closer to the week's low. The stochastics give investors an advanced warning that the trend in a stock or index may be reversing. Readings scale from zero to 100 with readings of less than 20.00 being oversold and readings of more than 100 being overbought. When stochastics decline to less than 80, it's a negative sign. When they rise to more than 20, it's a positive sign.

The second table shows earnings and value levels at which to buy on weakness and risky levels at which to sell on strength.

We crunched the numbers to help you decide if and when to invest. See today's tables following these profiles.

CarMax ($43.68, down 6.7% since March 31) reported earnings before the opening bell on Friday and missed the average analyst estimate for earnings per share by 1 cent. EPS was 52 cents. The stock failed at its 200-day simple moving average at $48.11 on April 3 and gapped below its 50-day SMA at $47.11, trading as low as $43.38 on Monday. Investors looking to reduce positions before the earnings announcement could have done so on April 3.

The weekly chart shifted to negative from neutral with the five-week modified moving average at $46.23. A monthly pivot is $45.97 with semiannual and quarterly risky levels at $46.64 and $47.29, respectively.

Monsanto ($112.30, down 1.3% since March 31) reported earnings before the bell on Wednesday and beat the consensus EPS estimate 6 cents a share with EPS of $3.15. The stock traded as low as $111.63 on April 2 then as high as $117.47 on April 3, just below the multiyear intraday high at $117.50 set on Jan.2. The high was a test of last week's risky level at $117.43 where investors could have reduced positions after earnings.

The weekly chart shifts to neutral from positive given a close this week below its five-week MMA at $112.34. Semiannual value levels are $88.87 and $88.55 with a weekly pivot at $114.45, and monthly and quarterly risky levels at $119.25 and $124.98, respectively.

Micron ($21.71, down 8.2% since March 31) reported EPS of 85 cents after the bell Thursday, beating the average analyst estimate by 24 cents a share. The stock opened with a day's high at $24.85 on April 4, testing last week's risky level at $24.68. This gave investors the opportunity to book profits after earnings.

In Investing Ahead of Earnings: CarMax, Monsanto, Micron and Texas Industries I warned that the weekly chart for Micron would shift to negative given a weekly close below its five-week MMA. The stock ended last week below its five-week MMA at $22.90. Quarterly and semiannual value levels are $20.68 and $14.84, respectively, with a weekly pivot at $22.93 and a monthly risky level at $28.12.

Texas Industries ($85.33, down 4.8% since March 31) reported EPS of 26 cents after the bell on Wednesday, beating the average analyst estimate by 17 cents a share reporting a loss of 26 cents a share. The stock set a multiyear intraday high at $90.74 on April 4 then traded as low as $83.98 on Monday.

The weekly chart remains positive but overbought in a parabolic pattern with the five-week MMA at $84.33. Monthly and semiannual value levels are $81.19, $62.89 and $59.01 with quarterly and weekly risky levels at $92.38 and $94.19, respectively.

Crunching the Numbers With Richard Suttmeier: Moving Averages & Stochastics

This table provides the technical status for the stocks profiled in today's report.

There are five columns with moving average titles: Five-Week Modified Moving Average, 21-Day Simple Moving Average, 50-Day Simple Moving Average, 200-Day Simple Moving Average and 200-Week Simple Moving Average.

The column labeled 12x3x3 Weekly Slow Stochastics shows the pattern on each weekly chart with readings from oversold, rising, overbought, declining or flat.

Interpretations: (stocks below a moving average listed in Red are below that moving average)

Five-Week Modified Moving Average (MMA) is one of two indicators that define whether a weekly chart profile is positive, neutral or negative. The other is the status of the 12x3x3 weekly slow stochastic.

A stock with a positive technical rating is above its five-week MMA with rising or overbought stochastics.

A stock with a negative technical rating is below its five-week MMA with declining or oversold stochastics.

A stock with a neutral technical rating has a profile that is not positive or negative.

The 200-Week Simple Moving Average (SMA) is considered a long-term technical support or resistance and as a "reversion to the mean" over a rolling three to five year horizon. (Even Apple (AAPL) declined to its 200-week SMA in June 2013.)

The 21-Day Simple Moving Average is a short-term technical support or resistance used by many hedge fund traders to adjust positions. A stock above its 21-day SMA will likely move higher over a rolling three- to five-day horizon and vice versa.

The 50-Day Simple Moving Average is also a technical support or resistance used by many strategists and commentators in financial TV.

The 200-Day Simple Moving Average is another technical support or resistance and I consider this level as a shorter-term "reversion to the mean" over a rolling six to 12 month horizon. (Even Apple tested or crossed its 200-day SMA in nine of the last 10 years.)

Crunching the Numbers With Richard Suttmeier: Earnings & Where to Buy & Where to Sell

This table presents the EPS reports and where to buy on weakness and where to sell on strength.

EPS Date is the day the company reports its quarterly results.

EPS Estimate is the average earnings per share estimate from Wall Street analysts.

Value Levels, Pivots and Risky Levels are calculated based upon the last nine weekly closes (W), nine monthly closes (M), nine quarterly closes (Q), nine semiannual closes (S) and nine annual closes (A). I have one column for pivots, which is a magnet for the period shown. The columns to the left of the pivots are first and second value levels. The columns to the right of the pivots are first and second risky levels.

Investors who wish to buy a stock should use a good-'til-canceled limit order to buy weakness to a value level. Investors who want to sell a stock should use a GTC limit order to sell strength to a risky level.

At the time of publication the author held no positions in any of the stocks mentioned.

Follow @Suttmeier

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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