As Markets Hit Highs, a Technical Look at Bank of America, Six Others Set to Report

NEW YORK (TheStreet) --As markets reach all-time highs, let's look at the stocks of six companies set to report earnings during the next two days. 

It is important that investors and traders understand the risk/reward for a stock both before and after a company reports quarterly earnings.

So far this year, the Dow Jones Industrial Average is up 2.9%, setting an all-time intraday high at 17088.43 on Monday with Dow component Intel (INTC) a leader, up 21% year to date.

Former Dow component Bank of America (BAC) is unchanged year to date, while two other members of the KBW Banking Index -- M&T Bank (MTB) and PNC Bank (PNC) -- are also up. M&T is up 4.5%, PNC 12%.

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The Dow Jones Transportation Average is up 12% year to date, setting an all-time intraday high at 8338.72 on Monday. Component CSX (CSX) lags the transportation average; it's up 8%.

These differentials are the reason investors and traders should focus on my two "crunching the numbers" tables, which provide current readings for both stock-specific fundamental data and simple readings of technical analysis.

The most important parts of the second table are action levels: value levels at which to buy on weakness and risky levels at which to sell on strength.

Let's take a look at the stock profiles:

Bank of America ($15.57) has been trading back and forth around its 200-day simple moving average since April 28, and followed Citigroup (C) higher on Monday after Citigroup reported earnings that topped analysts' estimates.

Bank of America also failed below its 200-day SMA, which is now at $15.68.

Analysts expect the bank to report earnings per share of 29 cents before the opening bell on Wednesday.

The weekly chart is positive with its five-week modified moving average at $15.51. Semiannual value levels lag at $10.16 and $9.11, respectively, with weekly and monthly risky levels at $16.37 and $18.04, respectively.

CSX ($31.03) traded at an all-time intraday high at $31.22 on July 3, and is above all five moving averages in the first table. Analysts expect the railroad company to report EPS of 52 cents after the closing bell Tuesday. The company's 12-month trailing price-to-earnings ratio is 17.2 with a dividend yield of 2.1%.

The weekly chart is positive but overbought with its five-week MMA at $30.47. Semiannual and quarterly value levels are $30.05 and $29.56, respectively, with a semiannual risky level at $32.95.

Intel ($31.49) traded at a multiyear intraday high at $31.57 on Monday and is above all five moving averages in the first table. Analysts expect the semiconductor giant to report EPS of 52 cents after the closing bell today. The company's 12-month trailing P/E ratio is 15.7 with a dividend yield of 2.9%.

The weekly chart is positive but overbought with its five-week MMA at $29.87. Semiannual and monthly value levels are $29.79 and $28.06, respectively, with a weekly risky level at $33.02.

M&T Bank ($121.63) set an all-time intraday high at $125.90 on June 10, and ended Monday below its 50-day SMA at $122.38 and above its 200-day SMA at $117.16. Analysts expect the regional bank to report EPS of $1.90 before the opening bell on Wednesday. The company's 12-month trailing P/E ratio is 16.3 with a dividend yield of 2.3%.

The weekly chart shifts to negative with a close this week below its five-week MMA at $122.54. A semiannual value level is $119.65 with semiannual and monthly risky levels at $125.68 and $126.76, respectively.

PNC Financial ($87.12) set an all-time intraday high at $90 on July 7, and is between its 50-day SMA at $86.45 and its 21-day SMA at $88.56. It's also above its 200-day SMA at $80.85.

Analysts expect the regional bank to report EPS of $1.77 before the opening bell on Wednesday. The company's 12-month trailing P/E ratio is 12.4 with a dividend yield of 2.2%.

The weekly chart is neutral with its five-week MMA at $87.35 and overbought 12x3x3 weekly slow stochastic. Semiannual value levels are $82.49 and $77.93 with quarterly and weekly risky levels at $89.31 and $92.53, respectively.

Textron (TXT) ($38.56) set a multiyear intraday high at $41.15 on June 9, and traded as low as $36.61 on July 10. It's above its 200-day SMA at $35.69 and below its 50-day SMA at $38.95.

Analysts expect the aerospace and defense company to report EPS of 47 cents before the opening bell on Wednesday. The company's 12-month trailing P/E ratio is 21.3 with a dividend yield of just 0.2%.

The weekly chart is negative with its five-week MMA at $38.73. Semiannual and annual value levels are $33.66 and $29.43, respectively, with a weekly pivot at $38.91 and quarterly and semiannual risky levels at $40.07 and $40.78, respectively.

Yahoo! (YHOO) ($35.70) has been trading back and forth around its 200-day SMA since April 4, and closed Monday below this average, which is now at $36.20.

Analysts expect the company to report EPS of 30 cents after the closing bell on Tuesday. The company's 12-month trailing P/E ratio is 27.9.

The weekly chart is positive with its five-week MMA at $35.38. A semiannual value level is $27.50 with a semiannual pivot at $35.43 and weekly and monthly risky levels at $37.08 and $40.66, respectively.

Crunching the Numbers with Richard Suttmeier: Moving Averages & Stochastics

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

The 12-month trailing price to earnings ratio

The Dividend Yield

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 readings from 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 or not 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.

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.

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.

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-until-canceled GTC 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.

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

TheStreet Ratings team rates BANK OF AMERICA CORP as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate BANK OF AMERICA CORP (BAC) a BUY. This is driven by multiple strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its reasonable valuation levels, expanding profit margins, notable return on equity and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • The gross profit margin for BANK OF AMERICA CORP is currently very high, coming in at 84.82%. It has increased from the same quarter the previous year. Regardless of the strong results of the gross profit margin, the net profit margin of -1.08% is in-line with the industry average.
  • BAC, with its decline in revenue, slightly underperformed the industry average of 2.6%. Since the same quarter one year prior, revenues slightly dropped by 4.6%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Commercial Banks industry and the overall market on the basis of return on equity, BANK OF AMERICA CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, regardless of the company's weak earnings results. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

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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