While technical analysis has many benefits, charts can’t help one predict a company’s financials. Thus, we never recommend chart-based trades for stocks that are within a week or two of reporting earnings. However, that does not mean we should ignore the technicals. In fact, the period just before and just after a stock reports is a perfect time to review the relevant patterns and levels. We’re going to do just that today for Netflix (NFLX) , Meta (META) and Alphabet (GOOGL) , the biggest components of the S & P 500’s communication services sector. While the biggest bank stocks historically kick off earnings season, traders have an eye on the first large cap growth stock to release numbers. And that’s always Netflix . NFLX’s report, and, more importantly, the reaction to said report, often sets the tone for what’s in store for mega cap growth names, many of which release numbers later in the earnings season. NFLX had a strong report last Thursday, the market rewarded it with a huge 11% gain the following day. The stock gapped higher (at $736) and continued to advance before closing all the way up at $764. For holders of NFLX, that’s great. For those wanting to buy it, but not wanting to chase it, it’s an extremely challenging scenario. One strategy that’s worked well for NFLX over the last year is paying attention to how the stock behaves vis-à-vis its earnings-induced gaps. It’s had noticeable gaps post earnings in three of the last four quarters before this one – Two up and one down . NFLX respected the upside gaps from last October and January, with the stock trending higher over the ensuing three months. Conversely, it filled April’s downside gap within a few weeks and rallied through mid-July. Thus, the next two weeks of action will prove important once again, with NFLX trying to hold above and, potentially, extend from last week’s gap. Alphabet bullish pattern Alphabet reports earnings next week on Tuesday. The stock’s technical set-up is crystal clear: it’s been forming a potential bullish inverse head & shoulders pattern since coming back from the late-August to early-September sell-off. The back-and-forth price action the last three weeks has constructed the pattern’s would-be right shoulder. The same gap-strategy applies to GOOGL post-earnings, but it’s just as important to see if the bullish formation’s structure is still viable. In other words, on a negative reaction, the best-case scenario would be having the stock respect the most recent low near $159. The stock’s 200-day moving average is right there, too (not pictured). Also notice how the 14-day RSI is trying to hold near the 50 mid-point level. Staying in the range’s upper half was a key during the stock’s uptrend from March through July earlier this year. Meta’s key area Lastly, but certainly not least, Meta reports next Wednesday. Meta has been a leading stock lately and broke out to new highs over a month ago. Like NFLX and GOOGL, it’s done a good job extending from upside gaps and filling downside gaps in 2024 in between earnings reports. As is quite clear, it now will be important for Meta to hold above its last breakout zone (near $540) on any negative reaction after it releases numbers in a week. -Frank Cappelleri Founder: https://cappthesis.com DISCLOSURES: (Owns GOOGL) All opinions expressed by the CNBC Pro contributors are solely their opinions and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent company or affiliates, and may have been previously disseminated by them on television, radio, internet or another medium. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY . THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND DOES NOT CONSITUTE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO BUY ANY SECURITY OR OTHER FINANCIAL ASSET. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE ABOVE CONTENT MIGHT NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISIONS, YOU SHOULD STRONGLY CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here for the full disclaimer.
Previous Article1 Top Artificial Intelligence (AI) Stock That’s a No-Brainer Buy
Related Posts
Add A Comment