12 Keys to Trading Earnings for Profits

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#10 Analyst Ratings

A sentiment measure that is more easily tracked is the composite analyst rating, which is available from many major financial Web sites.  These ratings simply track the total number of analysts who designate a particular stock as a "buy," "hold" or "sell."  Though the vast majority of ratings fall on the "buy" side (something the industry is roundly criticized for), we'll often see a smattering of "sells" that typically reflect a fairly strong degree of negative sentiment toward a stock.

On the other hand, a heavy weighting of "buys" means that optimism is at a peak and that there is much more room for downgrades than upgrades.  In other words, the ratings are as optimistic as they are likely to ever be.  This can be a warning sign, especially for a stock showing technical weakness.