This Chinese Education Company Just Grew Earnings a Whopping 35%!

You can make money on stocks with great earnings and you can make money on stocks with a great chart--but when you get BOTH watch the profits roll in...

This Chinese Education Company Just Grew Earnings a Whopping 35%!

Last Thursday on July 27th we featured New Oriental Education (EDU) as the "long of the day" because they just posted blowout earnings--up 35% for the quarter plus revenue rocketed an amazing 48%--right in the middle of a global slowdown! Plus the chart shows a strong uptrend that began way back in the middle of March. This powerful combination of great fundamentals and a bullish chart are exactly what we look for--and it's a combination that can make you a fortune.

After we recommended the stock subscribers could have purchased the EDU August $75.00 calls for just $.85 cents. Yesterday, the calls traded as high as $1.85 catapulting a modest $850 trade into $1,850---that's a 118% profit in just 5 days!

The really great news is this ride looks like it still has room to run so there could be a lot more profit where that came from. EDU provides private education to the Chinese from ages five to adulthood--everything from English classes to vocational training--and the Chinese take education VERY seriously. Any company that can grow earnings this radically in a down economy deserves a look.

These are the kind of great stocks we add to our bullish watch list EVERY DAY. And our bearish picks are on the opposite end--bad fundamentals and terrible charts equal great put profits. It's as easy as going to the Live Update table at the beginning of the day where you'll see an automatically updated ranking of the stocks on both our bullish and bearish watch lists. Focus on the ones that rise to the top and trade with confidence knowing each stock has been carefully researched in advance.

Subscribe to the Daily Report to take advantage of big moves like the one you see below--and sign up for the Options Success Trading Package for hands-free profits! For more information and to get started click here.

Market Commentary - The market continues to move higher and the bears are on the defensive. Now they have to prove their case. Asset Managers are scrambling to put money to work and those who are under-allocated are getting more aggressive as they buy every little pullback. Each day, the market opens on its low and it closes near its high of the day--extremely bullish price action.

We have broken out above the neckline of an inverted head and shoulders formation (one-year chart), and have rallied above a one-year down trend line plus the 200-day moving average was successfully tested. The momentum clearly favors the bulls and in quiet trading, the path of least resistance is higher. Bears have been declawed and they won't dare stand in front of this freight train.

By the end of the week, 85% of the companies in the S&P 500 will have reported earnings with almost 3/4 of them beating estimates. Analysts were expecting profits to decline by 35% and they are only down 29%--a big improvement when everything was looking bleak. As the year progresses, the comparatives will be easier to beat and in Q4, we are likely to see a massive earnings increase. Corporations have been quick to trim expenses and any uptick in demand will go right to the bottom line.

Economic news has been well received and even when it misses estimates, bulls have been able to find the silver lining driving the errant stock higher. Conditions don’t even have to improve--they just need to deteriorate at a slower pace to preserve investor confidence. Many economic indicators are bouncing off of the lowest levels we have seen in decades.

Today, factory orders rose more than expected and ISM services declined more than expected. The difference in both cases was minimal. The ADP employment index showed that employers cut 371,000 jobs last month. That would normally seem bearish, but it is an improvement from the 463,000 jobs that were cut in June. Initial jobless claims have been improving over the course of the last month and I believe Friday’s Unemployment Report will be well received. The consensus is for a drop of 328,000 jobs. Last month, 460,000 jobs were lost. Even if nonfarm payrolls drop by a worse than expected 370,000 the market will likely look past the miss and focus on the “less bad” aspect of the number.

Next week, the economic numbers are rather dull and trading should start slowing down. Retail sales will be released on Thursday and they will be the highlight. Retail numbers will be light as consumers are not ready to open up their wallets yet. The market has been able to shrug off weak retail in the past and is likely to do so again with the notion that conditions are improving. The only “fly in the ointment” is interest rates and the Treasury will be issuing longer-term bonds throughout the week. These have not attracted the same demand as shorter-term maturities and we could see interest rates tick higher. That would not be good for the market.

Even though some economic reports have improved and the market has traded almost straight up it's difficult to be a long-term bull. Excessive debt levels span from the government, to the states, to municipalities, to individuals. The government has infused massive amounts of capital into the banking system and economy to keep it treading water. When the stimulus ends the upside catalyst will be gone. Until then, follow the momentum and trade from the long side – with good trailing stops.

We've currently got a great list of solid companies that have reported good earnings and top line growth. As long as the SPY stays above 96, we will maintain a bullish trading approach. Many sectors are just starting to recover and there are great opportunities--to access our entire watch list plus two new trade per day click here.

Trade well,

Pete