Approximately one week away from Verizon’s (VZ) third quarter results, many investors are speculating whether to purchase shares of this lucrative telecommunications giant. In search for answers by examining earnings from other powerful monsters, there is a mix bag in terms of what to expect for both Verizon and the telecommunication industry in general. However, just specifically in the case of Verizon, I believe the real question should not be placed into whether Verizon accumulates high margins when two years are compared with one another or if this company beats its EPS estimate by a few cents, but how will Verizon perform in the next few years.

More than likely, with the giant status of Verizon, regardless of any significant changes from analyst expectations, Verizon shares should remain fairly steady when earnings for this company are reported in about one week time frame. You may say that anything is possible in this rational expectations market, but if you look at the technical side of this company over the past three years, you, as an investor would realize the sideways motion Verizon embodies. Fluctuating in the 30 to 40 point range for almost three years, Verizon looks very similar to other large cap giants such as Microsoft, reporting very little disturbances if at all in terms of share prices regardless of how earnings play out. While some investors may argue that such a stock represents a steady but guaranteed way of accumulating capital gains in the future, such a sentiment does not hold perfectly true with Verizon. Since its opening days about 25 years ago, Verizon has only grown 300% during that time period where much of that gain can be attributed to the overbought period of the late 1990s for the technology sector. While 300% may sound pretty lucrative to many investors, there are many other both well-established but relatively new companies on the market such as Google or Goldman Sachs which not only has the potential to reach 300% in 25 years but more than likely triple or quadruple that amount in possibly less than ten years. Thus, while you are pretty assured that Verizon will not decrease in terms of share price, even during a time of recession, to astounding levels, for the long term when looking at technical analysis I do not see much trend assurance for heavy optimism.

Nevertheless, I have only looked at one indicator in determining my rational for the purchase of Verizon shares. As an efficient investor, other indicators like fundamentals should be utilized as well. In the case for numbers when looking at Verizon, an almost parallel structure exists to how margins are represented juxtaposed to technical trends. It is true that Verizon has posted modestly higher gains year after year in most of the major categories, but the same can be said about how Verizon has moved in terms of share price during the same duration. While economic changes and consumer preferences, not to mention innovated telecommunication products, can challenge such momentum, for the time being, especially since Verizon is near a 52 week high, there should be no strong desire to purchase more or any shares as any falter in the economy or earnings will send Verizon back down a few points. Therefore, as prestigious as Verizon is in terms of branding and name recognition, just like my views on Microsoft, I do not see much encouragement or heavy optimism by purchasing shares from this company in both the short term as well as the long term.

Making Money

If you talk to ten investors, you will get ten different answers as to how they value a stock. Some will value a stock by cash flows, some use dividends, some use earnings, still others have complicated mathematical formulas. This is the beauty of the market. No matter how much science we use to value a stock, the bottom line is that human beings value a stock. The market price of one share is the aggregate of what everyone in the market sees as the value of the stock.

If the market were a science, no one would make any money. Computers would run a bunch of numbers and the markets would never present a buying opportunity. People buy and sell stocks every day. No matter how automated we make the market, humans are behind all of the decisions. We are emotional, irrational beings. If you understand this and keep it in the back of your mind when investing, the ups and downs of the market make much more sense. Using this knowledge, you become a better investor.

How Do I Use This?

Here is a simple example. We had been following a small retail clothing chain. They sell high end mens clothing (suits) which is a relatively timeless, universal product. Suits don't go out of style in a couple of months like teen apparel. The stock took a huge hit when they reported a mediocre quarter. Earnings were OK, but analysts were concerned about the inventory level. We knew that inventory didn't matter much for this company because suits will sell next season. We bought some shares. We made a 44% profit in 17 weeks.

What Happened?

The earnings conference call got a little heated between the analysts and the CEO. Analysts peppered the CEO with questions about inventory levels. He calmly explained that this wasn't a teen retailer. Inventory levels weren't much of a concern because the fashions could still be sold at a later date. But the analysts refused to give up on the questions about inventory levels. The CEO then lost his cool and said that "we are wasting every one's time" by continuing to talk about the inventory levels. The CEO was right, but the analysts punished the stock that day. They came out with scathing reports about the company and said the CEO was losing control. The stock dropped 27% in one day. And they didn't even have a bad quarter! Now that's a buying opportunity!

The point here is that the numbers meant nothing to the performance of the stock. The human beings behind the stock made it move. The numbers were fine, the company was growing quickly and efficiently. They just had high inventory levels. A little research and understanding how the market operates was much more important than any math you could do.

The bottom line is that any stock is worth what others are willing to pay for it. Earnings don't matter. Assets don't matter. All the math in the world doesn't fully explain the movements of the market. The only thing that matters is how people feel about a company. If they feel good about a company, the stock will receive a premium price. If people feel bad about the company, the stock will be traded at a discount. Your task as an investor is to take advantage of people's feelings in the market and turn them into profits!

Selling a stock at appropriate time requires practice. There factors effecting markets include the general economical conditions of the particular country, demand for the product sold by the company in which the investment is made, results of the company, their projections for future performance and so on.

A company may have done well in the past but there is no certainty that this will continue for ever. If the targets have not been achieved by the company for a certain period, the stock value might decrease. So also if their projections are not attractive, demand for that particular stock could be effected.

Bearing in mind some of these factors, one can fix a target where he is ready to sell in case of stocks increasing in value over a period of time. After a decent percentage of profit has been achieved, it would be wise to sell a portion of shares held in that company instead of holding the entire stock. Some other stocks in other companies may be at a loss which can be made up by this method. If the loss making stocks are too bad, further loss can be prevented by selling off the existing stocks.

If the company is known for its stability, by virtue of its financial position, one need not worry even if the stock dips below a certain limit, as it has the potential to rise in future. This exercise can be developed over a period of time with practice. In any case selling a portion of stocks that are profit making is advisable, some stocks can be still held for the future.

One should not become over greedy to make excessive profits as it might suddenly drop and the investor might lose more than expected. To make up the loss, it could take a long period of time.

In the present day, with the availability of internet and on-line trading facilities, one can trade from their homes at leisure, after careful study. Keeping in touch with financial journals, papers, magazines and TV provide information about companies and their shares. The latest informations help the investor to take proper action, whether to sell their stock, or a portion of them at a particular time.

Every investor should start with a good solid set of buying and selling rules and stick to them. This will take the emotional involvement out of the process of stock trading. When the emotions of trading are out of the equation, a person can use rational and logical thought instead of the emotional thought. An example of the emotional thought is when a stock is trading poorly and you say to yourself “This stock will come back so I will hold on to it for a while longer”. This type of thinking leads to huge losses at times. But if you have a set of selling rules in place, you simply set a percentage amount you are willing to lose and sell the stock if it hits the number.

Most professional traders will sell a new position if the trade turns bad and falls between two and eight percent. This type of rule will preserve your capital so that your remaining capital can be invested again to make up the loss on a later trade. Sell rules prevent the further deterioration of your capital. The loss of capital can be devastating for a person. A large loss requires a much larger gain later on to replace the lost capital. For instance, if you held a stock for a 50% loss you would need a 100% gain to counter the loss. So if a $50 stock falls to $25 before you sell, the only way to make the loss back is to buy a stock that must double in price.

Capital preservation is one the major considerations of a professional investor. If your capital is not reduced you can continue to profit from new trades. Which leads us to some buy rules. Some buy rules to include in your investing strategy;

Return of capital. How long will it take to have your initial investment returned to you so that it can be reinvested? Sophisticated professional investors want fast money. Money that moves and grows but is returned to the coffers quickly.

Return on investment. How much will your invested capital return as a profit? This is important when determining which investment to choose when deciding where to place your money. If one investment offers an annual return of 10% and a second investment returns 20% annually, it is an easy decision. A smart investor will invest in the second choice.

Future growth of a company. Is the business you are investing with growing, stagnant or shrinking? What is the outlook for trends in the industry? Are they positive? Is the company innovative?

Initial value of investment. Is the stock at the right price? Is it expensive when compared to other stocks in the same industry with similar returns? Your opportunity to make profits in stocks is often decided by the initial cost of a stock. This doesn't mean the price of the stock. It is determined by the multiple of a stock when compared with other stocks. A $60 stock with a multiple of 15 is cheaper than a $20 stock with a multiple of 30.

Save yourself a bunch of grief and take a small loss when necessary, keep your capital moving into investments with the best returns on investment and watch for growing companies to buy and finally, buy stocks which offer the best value.

On Wednesday, SPX opened sharply higher on the better than expected CPI report, although the core rate was in-line. SPX reached about 1,373 before pulling-back sharply. The strong open may have been a "blow-off top," and a bearish head & shoulders (on 15-minute chart) may have been created with the right shoulder at roughly 1,370 and the neckline at 1,357. Several weeks ago, SPX created a bullish inverse head & shoulders (on 15-minute chart) with the neckline at 1,338.

Over the past three days, SPX has traded entirely above the monthly upper Bollinger Band, currently 1,361. The 10-day MA, currently 1,362, has generally held for a month and the 20-day MA, currently 1,351, has generally held for three months. Both MAs have risen sharply. Consequently, SPX is being compressed between 1,370 and the rising 10-day MA. Given some short-term technical indicators are severely overbought, it's likely the compression will result in a move to the downside.

There are three possible scenerios. If the rally continues, there's a multi-year resistance level about 1,400. However, SPX will need to trade well above the monthly upper Bollinger Band, at levels not reached in 10-years, since the middle of the bubble boom. If there's a consolidation, SPX will fall below the 10-day MA, perhaps bounce initially off the 20-day MA, with further significant support levels at 1,338 and 1,326. Initial resistance is 1,370. SPX will then either rally, e.g. about 1,400, or fall, e.g. below 1,300. If there's a correction, support levels will turn into resistance levels through steep falls and volatile downtrends. First major support is 1,290.

Economic data and oil prices will largely determine SPX direction. Last week, the PPI core rate was reported much higher than expected, although the CPI core rate was in-line. Consequently, SPX may discount, over the next few weeks, higher PPI and CPI core rates in next month's report. Oil closed at 56.82 Friday. If oil falls and stabilizes around 50, that may be market bullish, or if oil rises and stabilizes around 60, that may be market bearish. I suspect, a consolidation will take place through the first week of November and then a correction will take place, since intermediate-term technical indicators are overbought. Nonetheless, I wouldn't rule out a rise to about 1,400 in early-November and a fall below 1,300 in late-November.

Free chart available at PeakTrader.com Forum Index Market Forecast category.

Arthur Albert Eckart is the founder and owner of PeakTrader. Arthur has worked for commercial banks, e.g. Wells Fargo, Banc One, and First Commerce Technologies, during the 1980s and 1990s. He has also worked for Janus Funds from 1999-00. Arthur Eckart has a BA & MA in Economics from the University of Colorado. He has worked on options portfolio optimization since 1998.

Mr Eckart has developed a comprehensive trading methodology using economics, portfolio optimization, and technical analysis to maximize return and minimize risk at the same time and over time. This methodology has resulted in excellent returns with low risk over the past four years

Every investor should start with a good solid set of buying and selling rules and stick to them. This will take the emotional involvement out of the process of stock trading. When the emotions of trading are out of the equation, a person can use rational and logical thought instead of the emotional thought. An example of the emotional thought is when a stock is trading poorly and you say to yourself “This stock will come back so I will hold on to it for a while longer”. This type of thinking leads to huge losses at times. But if you have a set of selling rules in place, you simply set a percentage amount you are willing to lose and sell the stock if it hits the number.

Most professional traders will sell a new position if the trade turns bad and falls between two and eight percent. This type of rule will preserve your capital so that your remaining capital can be invested again to make up the loss on a later trade. Sell rules prevent the further deterioration of your capital. The loss of capital can be devastating for a person. A large loss requires a much larger gain later on to replace the lost capital. For instance, if you held a stock for a 50% loss you would need a 100% gain to counter the loss. So if a $50 stock falls to $25 before you sell, the only way to make the loss back is to buy a stock that must double in price.

Capital preservation is one the major considerations of a professional investor. If your capital is not reduced you can continue to profit from new trades. Which leads us to some buy rules. Some buy rules to include in your investing strategy;

Return of capital. How long will it take to have your initial investment returned to you so that it can be reinvested? Sophisticated professional investors want fast money. Money that moves and grows but is returned to the coffers quickly.

Return on investment. How much will your invested capital return as a profit? This is important when determining which investment to choose when deciding where to place your money. If one investment offers an annual return of 10% and a second investment returns 20% annually, it is an easy decision. A smart investor will invest in the second choice.

Future growth of a company. Is the business you are investing with growing, stagnant or shrinking? What is the outlook for trends in the industry? Are they positive? Is the company innovative?

Initial value of investment. Is the stock at the right price? Is it expensive when compared to other stocks in the same industry with similar returns? Your opportunity to make profits in stocks is often decided by the initial cost of a stock. This doesn't mean the price of the stock. It is determined by the multiple of a stock when compared with other stocks. A $60 stock with a multiple of 15 is cheaper than a $20 stock with a multiple of 30.

Save yourself a bunch of grief and take a small loss when necessary, keep your capital moving into investments with the best returns on investment and watch for growing companies to buy and finally, buy stocks which offer the best value.

Most all of us have hear stories of someone who has made some money by investing in stock. So we all know that it can be done. You may have even heard someone say that it is easy, and anyone can do it. Now, you want to try your hand at it and are ready to put some money on the market - but don't know how to get started. This article will give you some ideas about where to begin.

Learn About The Market

The stock market involves many things and you will not learn all you need to know with one little article. Start doing some rather extensive reading of articles and books from the bookstore about investing. The stock market is not something you learn in an hour or two. Otherwise, you may find that you foolishly, and hastily, threw away a lot of money unnecessarily. You should not rush into, just because someone else you know is making their investment.

Research The Market

Being able to stay on top of the market and come out ahead means that you will have to do your homework in the first place. Look carefully into the company that you want to invest in so that you can make educated decisions. Understand some of the company's history, why they would be good to invest in, and find out where they are going, too. Learn a little about the financial status of the company, and how well their stocks have recently performed.

Learn what information you can find out about the stocks on the Internet, so you know how you can track your investments quickly, and understand any trends that are developing.

One of the best things you can do is to plan a strategy for you stock investments. If you treat your investments like your own investment company you should be able to make a profit. But also, like in any business, you may expect to lose some, too. By sticking with solid companies that are making great profits, you will find that you can have a part in their profit, as well.

Plan For The Long Haul

Investing in the stock market and making a profit is generally not something that happens overnight. It is a long haul investment and you will see a lot of fluctuation in the stock that you choose. Keep your money there through some of the think and thin of the company, but also know when it is time to trade in your stock, too. Don't let it go down to nothing and lose it all simply because you were afraid to move it.

Stay Informed About Your Stocks

The stock market information is readily available to anyone who wants to know what is going on. You should pay attention to your investments as you do your credit cards and your checking account. One of the worst things you can do is to ignore it thinking that it will take care of itself - it won't, and that is why you need to watch it regularly.