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Tickers in this Article: LMT, CME, SGP
Every day in the markets, some stocks move on heavy volume. This can be based on factors such as news, earnings or upgrades/downgrades. To find good long- and short-term situations, we must first see whether the stocks can hold the gains or losses on the news. If the stock can hold that within the first hour, it is a good long or short candidate. If it cannot hold the opening gains or losses, it could be a warning sign that something else is being factored in. (One suggestion is to use this indicator to validate a change in price direction and moving averages; see Volume Oscillator Confirms Price Movements.)

Three stocks on the radar are Lockheed Martin (NYSE: LMT), CME Group (Nasdaq: CME) and Schering-Plough (NYSE: SGP).

Lockheed Martin Raised Guidance And CME Continues To Grow
Lockheed Martin beat earnings estimates coming in at $1.92 per share, or $782 million, compared with analysts' expectation of $1.89, according to FactSet. The company also raised its full-year earnings guidance to $7.55 to $7.70 per share versus the previous estimate of $7.45 to $7.60.

The company continues to see an acceleration in earnings, and the increase in guidance only confirms this fact. The first forecast for next year's earnings came in between $7.65 and $7.90, which was well below the $8.40 expected by analysts, according to Thompson Financial Network. It would not be surprising to see the stock continue to do well both in the short and long term. After the first hour of trading, Lockheed Martin stock was down $6.86 and ended October 21 at $84.19, down $9.03 or 9.69%.

CME Group To Eliminate Jobs
Meanwhile, CME Group announced October 20 that it will eliminate 150 jobs from its New York Mercantile Exchange (NYMEX) operations once the acquisition is complete. The company said the cuts will take place over the next 18 to 24 months and that NYMEX will continue to maintain its headquarters in New York. The company has agreed to the acquisition of NYMEX to gain a foothold in the lucrative oil derivatives trading market. This will allow the company to increase its national and international exposure. The hope is to cause earnings to grow and the company to become a dominant player in the world trading markets. As this happens, look out for CME shares over the long term. After the first hour of trading, CME was down $22.34 and closed October 21 trading at $328.69, down $31.63 or 8.78%.

Schering-Plough Beats Estimates
Schering-Plough beat Wall Street estimates with earnings per share of 34 cents versus the Thompson Reuters estimate of 31 cents. Sales were $4.58 billion, up 63% from $2.81 billion in the same quarter of 2007. This increase came despite a 15 percent decrease in sales of its cholesterol drug franchise, Zetia and Vytorin, which totaled $1.1 billion.

"While the U.S. market remained difficult, we continued to take advantage of our growing international presence and opportunities," CEO Fred Hassan said.

The company is well-diversified and continues to deliver solid earnings in spite of seeing sales drop in two of its major drugs. It would not be surprising to see the company continue to do well over the long term. Schering-Plough shares are trading at $14.93, up 43 cents after the first hour but closed down 8 cents or 0.55% on October 21.

Bottom Line
It is clear that news events can affect the price of a stock both in the long and short term. However, to profit on this, watch and see how the stock trades. If it can hold its opening losses or gains, it might be a good candidate. If it cannot hold the price levels, it's advisable to wait and see what happens.

This type of strategy demands controlled decision-making, requiring a continual refinement of entry and exit techniques. Read more in Momentum Trading with Discipline.

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