How to Trade Earnings for Home Depot, Red Robin, Staples and More

NEW YORK (TheStreet) -- We're crunching the numbers on five companies that report quarterly earnings before the opening bell Tuesday. One is a component of the Dow Jones Industrial Average but has been lagging that index.

The profiles below provide trading guidelines for the stocks in two "crunching the numbers" tables that follow on pages 2 and 3.

Home Depot (HD) ($77.36), down 6% year to date. Analysts expect the home improvement retailer and Dow component to report earnings per share of 99 cents. The stock set an all-time intraday high at $83.20 on Feb. 5 then traded as low as $74.61. It is now below its 200-day simple moving average at $78.04. The weekly chart is negative with its five-week modified moving average at $78.31. Weekly and semiannual value levels are $75.46 and $75.25, respectively, with semiannual and monthly risky levels at $81.82 and $84.13, respectively.

Medtronic (MDT) ($60.39), up 5.2% year to date. Analysts expect the medical technology company to report EPS of $1.12. The stock set an all-time intraday high at $62.90 on April 4 then traded as low as $55.85 on April 14, which was below its 200-day SMA, now at $57.04. The weekly chart shifts to negative with a close this week below its five-week MMA at $59.41. Semiannual value levels lag at $50.16 and $44.05, respectively, with a weekly pivot at $60.65 and quarterly and monthly risky levels at $61.93 and $63.89, respectively.

Red Robin Gourmet (RRGB) ($61.94), down 16% year to date. Analysts expect the chain of gourmet burgers to report EPS of 73 cents. The stock set an all-time intraday high at $86.83 on Nov. 5 and has since been in a downtrend trading as low as $60.04 on May 15, well below its 200-day SMA at $70.44. The weekly chart is negative with its five-week MMA at $67.03. Weekly and semiannual value levels are $61.02 and $51.28, respectively, with semiannual and quarterly risky levels at $64.49 and $71.07, respectively. With a tight weekly value level, note the risk to the downside given a negative reaction to earnings.

Staples (SPLS) ($13.24), down 17% year to date. Analysts expect the retail chain of office supplies to report EPS of 21 cents. The stock has been below its 200-day SMA since Jan. 9, trading as low as $11.04 on March 27. The high since than has been $13.50 on May 14, which is still below the 200-day SMA at $14.23. The weekly chart is positive with its five-week MMA at $12.60 and its 200-week SMA at $15.47. Staples has been below its 200-week SMA since March 2011. A quarterly value level is $10.14 with a weekly pivot at $13.40 and monthly and annual risky levels at $13.93 and $15.54, respectively.

TJX Companies (TJX) ($58.56), down 8.1% year to date. Analysts expect the parent of T.J. Maxx, Marshalls and HomeGoods to report EPS of 67 cents. The stock set an all-time intraday high at $64.38 on Jan. 13 then traded as low as $55.82 on Feb. 5, holding its 200-day SMA. The stock is currently just below its 200-day SMA at $58.94. The weekly chart is negative with its five-week MMA at $59.06. Weekly and semiannual value levels are $56.01 and $55.29, respectively, with semiannual and quarterly risky levels at $62.97 and $64.56, respectively.

Your investment policy among these stocks depends on whether or not you are a buyer on weakness or a seller of strength. We advocate using a good-'til-cancelled limit order to buy weakness to a value level or to sell strength to a risky level.

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 the 200-Week Simple Moving Average.

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

Interpretations: Stocks below a moving average are listed in red.

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 level 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 level, 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 estimates including date and before or after the close, 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 EPS 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.

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

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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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