What You Should Avoid This Earnings Season

When we spoke last weekend, I mentioned that earnings – not the poor jobs report – would be the number one driver of volatility in the financial sector.

Now Citigroup, JPMorgan, and Wells Fargo just kicked off earnings for the big banks by beating expectations.

But as I told CNBC yesterday, here’s why you should stay away from one of them…


Here’s Your Video Recap:

  • When it comes to bank stocks and earnings, I would’ve said that the numbers are already baked into the prices. But with recent global events and eight days of market moves to the downside, it’s still possible that we’ll see some surprises to the upside – even if only for the short term. This could be a much-needed boost to the financial sector, which is down 10% since the beginning of March, according to the Financial Select Sector SPDR ETF (XLF).
  • Citigroup Inc. (C) is probably the cheapest of the big banks that released earnings yesterday (and one I happen to own short-term call options on). As far as patterns go, its last four earnings sessions were a bit of a toss-up in terms of price. Traders are expecting a 2.5% pop in the stock after earnings, which would put the stock around $60 after the report. And as of the time of writing, C traded at a high of $59.71.
  • JPMorgan Chase & Co. (JPM) is another one I happen to own short-term call options that beat earnings expectations. This is the only bank stock that had four consecutive quarters of positive price movement just after an earnings report. Now JPM is a value play simply based on its previous patterns after earnings and anticipate the stock to reach a price target of between $88 and $99. Right now, it’s trading at a high of $86.99.
  • Wells Fargo & Company (WFC) is the weakest of the three. It’s still suffering from its fake account problems of last year, and I believe it will take some time to get past that. While it beat expectations yesterday, it’s the one stock I’d say stay away from right now due this uncertainty.

Now next week is going to be a big one for pharmaceuticals, like Johnson & Johnson (JNJ) and Abbvie Inc. (ABBV). So I’ll be showing a special way to “predict” how any stock will move – and cash out on those movies quickly and easily.

Stay tuned…

Tom Gentile

America’s #1 Trader

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