How I Make My Picks

Late Thursday I picked CBK as a stock that I feel is going to rise before its earnings, and I expect the stock to go up above 10 dollars per share. When I made the pick, the stock was at 9.40 per share. Here is what was going through my mind as I was deciding on this stock.

1. First of all I needed to decide which way the market was going to be going for the next several days and for the next week. This determines if I do one of two things:
                A) If I do the three day drop: I look at the earnings calander three days out and I hunt for stocks
                     that have been climbing up steadily over the last week or so leading up to thier earnings date.
                     I then look for those that have dismal analysist expectations. Poor last several quarter suprise
                     performance, expectations in the red way below benchmark, etc. Below is a snapshot of what
                     Im looking for:

                    As you can see in the section "Earnings History" it had some dismal to the downside suprises
                    for the last 3 out of 4 quarters. Now continue down to the bottom where it says "Growth Est"
                    where it puts up the stock against the industry, sector and S+P benchmarks for comparison.
                    Compared to these the stock itself is seriously in the red.
                    Now when I see something like the above in the anaylist expectiations section, and I see
                    that the stock has been rising for a week or so leading up to the earnings date, that tells me
                    that there is a 90% chance that the public is wrong due to the stock having weak underlying
                    fundimentals and that the public is piling on this because it is a momentum play. Of course,
                    there is about a 5%-7% chance that there is an insider thing happening on the stock, but
                    having a 90% chance that this will work out means that I will make money in the long term
                    with this setup. Again, bad anaylist numbers, and the stock rising over the previous week
                    leading up to earnings. This is where I purchase a put at the money or slightly in the money
                    two days before earnings. When the actual earnings happens chances are because of the
                    stocks underlying fundimentals, the stock is gonna drop when the earnings that are probably
                    going to be crap is going to cause the stock to snap to its correct valuation. When this happens
                    the put you bought (especially if the current month or just one month out to expiration) will
                    suddenly jump up in price 30% to 100%. You then sell the put and look around for your next
                    opportunity.

                 B) If I do the three week climb: I look at the earnings calander about 2 and a half weeks out and
                      I hunt for stocks that have not yet begun the two week climb that good stocks will usually do
                      starting about 11/2 to 2 weeks before the stock announces earnings. I then look for stocks
                      that have excellent analysist earnings expectations. Below is an example of a stock that I
                      am looking for:
                      As you can see in the section of "Earnings History" there have been significant upside suprises
                       to the upside for most of the last 4 quarters, and looking down at "Growth Est" you can see
                      that comparing to the benchmark Industry, S+P and Sector, it is a standout from all of these
                      with significant percentages to the upside. What this means is that the public will also see this
                      and will most likely begin to pile on this stock causing the stock to climb all the way up to
                      earnings. What I do is when I find one of these stocks I purchase a call option at the money
                      and ride it up to about a day or two before its earnings announcement. I bail at that point
                      1 to two days before the earnings announcement because as it gets close, the number starts
                      to leak out on the trading floor and people will usually begin pre selling causing the price to
                      slip a bit. So my call that I purchased two weeks ago or so can increase in price from 30%
                      to anywhere to 100% or more.

(TO be continued later tonight)