BlackBerry, Pier 1, Rite Aid, Darden: How to Trade Before Earnings

NEW YORK (TheStreet) -- Today we'll explain how to trade eight companies that plan to report earnings later this week. They include BlackBerry (BBRY), Rite Aid (RAD) and Pier 1 Imports (PIR). All eight have significant year-to-date gains or losses going into earnings.

Can Blackberry and Rite Aid continue their turnaround stories? Can Pier 1 Imports begin a turnaround?

Here are the eight earnings profiles. Two "Crunching the Numbers" tables follow.

BlackBerry ($8.05), up 8.2% year to date. The company is scheduled to report before the bell Thursday morning. Analysts expect the company to report a loss of 28 cents a share. Shares traded as high as $10.90 on Feb. 28 then as low as $7.01 on April 14 and have been below their 200-day simple moving average since March 28. A positive reaction to earnings will begin a trend above their 200-day SMA, which is now at $8.20.

The weekly chart shifts to positive given a close this week above the five-week modified moving average at $7.78 with the 200-week SMA at $21.64. A monthly pivot is $8.13 with a quarterly risky level at $11.16.

Darden Restaurants (DRI) ($49.59), down 8.8% year to date. Analysts expect the company to report EPS of 93 cents before the opening bell on Friday. The restaurant owner recently sold its Red Lobster brand. This stock has been trading back and forth around its 200-day SMA at $49.89 since Jan. 21. Darden is one of Jim Cramer's Top Picks.

The weekly chart is neutral with the stock between its 200-week SMA at $49.16 and its five-week MMA at $49.82. Annual value levels are $48.40 and $44.50 with monthly and quarterly risky levels at $50.80 and $51.25, respectively.

CarMax (KMX) ($44.29), down 5.8% year to date. Analysts expect the used car retailer to report EPS of 67 cents before the opening bell on Friday. The stock had been below its 200-day SMA at $47.27 since March 24, trading as low as $42.54 on April 15.

The weekly chart is neutral with its five-week MMA at $44.81 and its 200-week SMA at $36.47. An annual value level is $37.69 with weekly and monthly risky levels at $45.56 and $45.90, respectively.

Kroger (KR) ($46.89), up 19% year to date. Analysts expect the grocery retailer to report EPS of $1.05 before the opening bell on Thursday. The stock set an all-time intraday high at $48.56 on June 9 and has been above its 200-day SMA at $41.94 since Feb. 19.

The weekly chart is positive but overbought with its five-week MMA at $46.56. Semiannual and monthly value levels are $44.89 and $44.60, respectively, with weekly and quarterly risky levels at $49.90 and $51.65, respectively.

Pier 1 Imports ($18.18), down 21% year to date. Analysts expect the retailer of furniture and home goods to report EPS of 20 cents before the opening bell on Thursday. The stock gapped below its 200-day SMA on Jan. 9 and traded as low as $16.86 on June 4 with the 200-day SMA now at $19.89.

The weekly chart shifts to positive given a close this week above the five-week MMA at $17.89 with its 200-week SMA a key support at $16.54. Monthly and annual value levels are $17.61 and $15.24, respectively, with a quarterly risky level at $23.92.

Rite Aid ($7.16), up 42% year to date. Analysts expect the pharmacy chain to report EPS of 4 cents before the opening bell on Thursday. The stock set a multiyear intraday high at $8.61 on June 4 and is well above its 200-day SMA at $5.99. TheStreet's Shawn Ingram explains why Right Aid still has a hold rating

The weekly chart is negative with its five-week MMA at $7.44. A semiannual value level is $5.40 with a quarterly pivot at $7.03 and monthly and weekly risky levels at $7.92 and $8.13, respectively.

Smith & Wesson (SWHC) ($16.65), up 23% year to date. Analysts expect the manufacturer of firearms to report EPS of 40 cents after the closing bell on Thursday. The stock set a multiyear intraday high at $17.28 on June 11 after trading as low as $11.31 on Feb. 26 when it held its 200-day SMA now at $13.13.

The weekly chart is positive but overbought with its five-week MMA at $15.82. Semiannual value levels are $14.93 and $12.03 with a quarterly pivot at $16.54 and weekly and monthly risky levels at $17.56 and $18.11, respectively.

Tibco Software (TIBX) ($21.06), down 6.3% year to date. Analysts expect the network software company to report EPS of 11 cents after the closing bell on Thursday. The stock has been below its 200-day SMA since Jan. 22 trading as low as $18.20 on June 4 with its 200-day SMA now at $22.41. TheStreet's Shawn Ingram explains how a Barclay's lowered price target will effect this stock.

The weekly chart is positive with its five-week MMA at $20.40 with its 200-week SMA at $24.21. Weekly and monthly value levels are $20.15 and $18.09, respectively, with an annual risky level at $24.28.

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.

Follow @Suttmeier

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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