TradingMarkets' 7 Stocks You Need To Know About For Wednesday

Stocks fell Tuesday on lowered guidance and inflation concerns. 

Lexmark (LXK | Quote | Chart | News | PowerRating) lowered guidance for Q# and now sees EPS of 0.40 -0.50 vs. the $1.02 consensus. LXK fell 17.44 to close at 13.50.

Clorox (CLX | Quote | Chart | News | PowerRating) guided lower for Q2 and now sees 0.41 -0.47 vs the 0.55 consensus. (full story)

Sun Micro (SUNW | Quote | Chart | News | PowerRating) said it entered into a multi-year strategic agreement with Google (GOOG | Quote | Chart | News | PowerRating) promoting Java and the Google Toolbar.

Speeches by two Fed officials--St. Louis' William Poole and Dallas' Robert Fischer--focused investor's attention on inflation.

US chain store sales rose 0.6%. Factory orders rose 2.5% vs the 2.0% consensus.

Now, here are a few stocks to watch on Wednesday:

National Semi (NSM | Quote | Chart | News | PowerRating) meets with analysts on Wednesday.

NutriSystem (NTRI | Quote | Chart | News | PowerRating) guided well above consensus and the stock traded up after hours.

Mips Technologies (MIPS | Quote | Chart | News | PowerRating) guided Q3 lower and now sees revenues in the $11.8-$12.0 million range, down from the $14.7 million consensus.

Mercury Interactive (MERQE | Quote | Chart | News | PowerRating) guided its third quarter below consensus, to $198-$203 million, from the previous $205-$215 million.

EMC {EMC|EMC] has made a nice "V" but may rest a bit here.

DRS Technologies (DRS | Quote | Chart | News | PowerRating) also looks lower, having pulled back up to its 50-day MA after making a lower high.

Lexmark (LXK | Quote | Chart | News | PowerRating) got whacked on Tuesday after guiding lower. There is always the possibility of a short-term bounce, but this is for very nimble traders only.

OK, here's the chart of Capstone I put up last night and here's what I said:

"Capstone (NasdaqNM:CPST - News) rose after a CNBC guest said the company had record insider buying. Also, there is a very interesting pattern going on here--actually, one of my favorites. Please email be at bricewightman@tradingmarkets.com and let me know what it is. (Hint: it was a TradingMarkets Trading Lesson of the Week a while back). I will let you know what the answer is later in the week."

I got a ton of email on this and, by popular demand, rather than waiting til later in the week to give you the answer, I'm going to explain it now:

Notice that the price is higher, but the stochastics are lower. This is exactly opposite of the way stochs are used traditionally. Normally, for a long, you'd be looking for price making a lower low and stochs making a higher low. That is called positive stochastic divergence.

In the chart above, you've got the opposite situation: price is higher but stochastics are lower. I have seen this called "hidden divergence" or "reverse divergence." Call it what you like, but it seems to be effective in many cases (no, not all, nothing works every time--remember that).  This is not my pattern nor am I taking credit for it--just passing it along to you.

We'll see how this one plays out.

Brice Wightman