By: Momei Qu

Contributor, Stock Traders Daily

Real Time Trading Reports:  Included are detailed trading reports designed to help investors realize opportunities in these companies as earnings are released.  The reports are linked to the stock symbols in the article below.

(La Jolla, CA)  Financial stocks have performed unexpectedly well for the last two quarters, surprising Wall Street analysts and traders alike. Will this bullish wave ride into the third quarter? The Dow Average is looking strong after closing at 9871 Tuesday, up 51% from the 2009 low of 6547 in March. However, continuing issues of credit delinquencies and low M&A volume could limit the upside. Accordingly to a recent report by Soleil, credit losses are not expected to peak until fourth quarter. Mortgage banking revenues, which boosted many firms? second quarter earnings, and equity offerings, while still strong, are also down from second quarter.

This is a highly anticipated week for earnings, as four banking giants are scheduled to report. JPMorgan led the way earlier today by reporting $3.6 billion in profits and 82 cents a share, beating Wall Street estimates? 52 cents a share. Traders now turn their attention to Citigroup and Goldman Sachs, both reporting Thursday, and Bank of America on Friday.

Citigroup (NYSE: C), who exceeded Wall Street expectations in the previous two quarters of the year, is projected to have a much less favorable quarter. Analysts are estimating $20.49 billion revenues, up 40% from 3Q 2008, but a net loss of 21 cents per share. The losses can be largely attributed to credit card delinquencies, which are tied to unemployment. Credit losses increased from $10.3 billion in the first quarter to $12.4 billion second quarter, and with unemployment recently rising to 9.8%, that figure will likely go up. Citigroup closed at $4.83 per share Tuesday, only 25% of its 52 week high of $19.25 per share. So despite potential setbacks this quarter, Citigroup is still a bargain that could provide solid returns once credit losses stabilize. To learn about the best time to invest in Citigroup while controlling risk, take a look at our free C trading report.

Wall Street analysts are much more optimistic about Goldman Sachs (NYSE: GS), projecting earnings of $4.24 a share, 57% higher than 3Q 2008, and revenues of $11 billion. Goldman has exceeded Wall Street estimates in four of the last five quarters. The gains this quarter are attributed much of the same factors as the 2Q ? rebound in the equity market and steady flow of fixed income business. The recent halt in the decline of home prices could also benefit the bottom line with fewer write downs on secured debt. New investors should be aware of the recent surge in stock price. Shares rose over 30% in the past 3 months and reached a 52 week high of $192.17 just last week. Goldman closed $187.23 Tuesday. Trading at or near its 52 week high could mean the stock is currently overvalued. Our free GS trading report can help you decide whether the best time to trade Goldman stock is now or wait for share prices to go off its 52 week high.

Bank of America (NYSE: BAC) is facing similar issues as Citigroup going into third quarter earnings. Although income from fees is likely to increase, high credit losses from cards and loans cause analysts to project a net loss of $0.06 per share. The sudden announcement of Ken Lewis? resignation at year end and current lack of a successor adds to the instability of the stock. Bank of America closed at $18.33 Tuesday, 67% of its 52 week high of $27.21. The stock is up over 400% since dropping to around $3 a share in March, but has hovered about $17-$18 a share in recent weeks. Will Bank of America be able to break out of the stagnation and return high values in the upcoming months? Our free BAC trading report can provide insight.

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