Three companies from my stock watchlist report Q3 earnings this week, all on Thursday 25 at the close of Wall Street's session: Gilead, Illumina, and the popular Twitter.
Traders love earnings days. It's the right moment in which stocks get momentum and volatility, ideal for a quick day trade or a swing trade. One of the first rules of risk management in stock trading is don't traded longs or shorts before the ER, because it's just as gambling. Don't hurt your portfolio with bets. In that case, better use option spreads like the popular straddle ATM or buy a cheap call (or put) OTM, risking little capital with minimal, but existing, chances of a great profit.
The other way is taken by cautious traders: previously check chart trends, latest news of the company for key data, recent earnings surprise, insider trading, volatility, market sentiment, short-interest, and so. When earnings are published, checks and analyze quickly the main lines of the report (EPS, sales and guidance, if they beat or miss the estimates), buybacks and sensible data of the particular stock. Look at the trend in a tick-chart, read traders sentiment through chats (like Twitter or StockTwits) and wait for the conference call, usually an hour after the report, for more key information. A conference call could easily revert the stock trend and liquidate a hurried trade. The next day at the opening is a good idea to wait for analysts' reports and ratings: upgrade, downgrade, price targets, based on results. With all this information in our hands, it is more simple get a profitable trade.
Technical analysis seems unnecessary before an earnings report, but that's not true. Traders, investors, and smart-money always are looking at the charts for the previous levels and trendlines as a guide to limit the upside move ahead a good report, and similar for the downside. Let's review these three stocks:
1. Gilead Science GILD, $65.86
What an amazing and "clean" chart! The support at $61.40 is really strong, near six touches in this year. And above a clear resistance in its uptrend line. And today the price touching it again for 4th time in the year, and also at its SMA200 average! Depending on earnings, the price could explode and break any of the levels of this year-descendant-triangle pattern, easily $70, only in case of a positive report.
2. Illumina Inc. ILMN, $309.05
Since reaching year lows in September at $263, Illumina began a decent technical recovery and now is t$309, the same level at which its huge gap closes in mid-July. Near $70 to fill that and its Q3 earnings could be the way for.
The stock has been gaining momentum last two weeks since the recent partnership with Qiagen QGEN to deliver in-vitro diagnostic tests. Take note that the biotechnology sector (followed by IBB ETF), saw some strength last week. Positive clinical readouts, a couple of M&A deals and hopes of drug companies clinching a broader opioid settlement worked in favor of the sector. A good earnings report could send this stock to $325-335, above the 50% of Fibonacci retracement.
Ambiguous sentiment is perceived in this stock before its earnings report tomorrow, despite today is breaking down its strong support in the uptrend line shown, with increasing volume. I'm expecting great volatility, and prefer to wait tomorrow for deciding a trade. Usually, many analysts publish their ratings on this popular stock that finally decide the stock trend. Bad earnings report could send the stock to $36.90, its SMA200 average.
3. Twitter Inc TWTR, $38.81
Ambiguous sentiment is perceived in this stock before its earnings report tomorrow, despite today is breaking down its strong support in the uptrend line shown, with increasing volume. I'm expecting great volatility, and prefer to wait tomorrow for deciding a trade. Usually, many analysts publish their ratings on this popular stock that finally decide the stock trend. Bad earnings report could send the stock to $36.90, its SMA200 average.
Good Trading!
@BravoTrader
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