Tuesday, April 26, 2011

4/26 Earns

My scan for earnings plays -- stocks that are candidates for straddles and strangles in an effort to capture sharp moves in either direction -- uncovered four stocks that are either surprise prone, have high volatility, or both.

NBR is both volatile and prone to surprises -- three out of last five quarters produced surprises exceeding 50%. BP, as a result of the Gulf oil spill, has had surprises of 50% and greater in each of the past five quarters, but it is of a lower volatility.

ABX and BHI lack surprisiness, but are higher in volatility.

ABX announces after the close today, April 26. BP, ABX and BHI are scheduled to announce before the open tomorrow, April 27.

When I score these stocks, I'm looking for them to meet these criteria:

  • The 14-day average true range is 2.5% of the price or higher.
  • Of the last five quarters, earnings have shown a 50% surprise, in either direction, at least three times, and additionally, a 20% surprise at least two times.

Among the others announcing, which failed to meet my criteria, the 800-pound gorilla is AMZN, after the close today. At $180-plus per share, it's a pretty expensive stock for straddles or strangles. It has not had a single earnings surprise in the past five quarters. This time? Who knows?

BRCM also announces after today's close. Announcing before tomorrow's open are BA, COP, GLW and the dividend-paying utility SO.

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