by Profit Scanner | April 18, 2014 11:27 am
Thursday’s earnings calendar was full of big-name earnings reports, with several big names posting surprises.
Not all of them were good.
Still, while fundamentals and financials matter, investors are well-served by also utilizing some technical analysis in and around earnings reports. If nothing else, a little attention paid to stock charts can keep traders from getting caught off-guard by what’s ahead.
Click to Enlarge Investors didn’t like the news that Chipotle Mexican Grill (CMG) will raise its menu prices for the first time in three years, but the upper-tier fast food chain defended the decision with reports that it saw quarterly sales climb 13.4%. CMG’s management gave the market an increased sales outlook even with the plan to increase prices.
While Chipotle’s forward guidance looks tasty, CMG’s stock charts aren’t quite as appetizing for the short- and intermediate term.
On the April 17 close, CMG’s short-term chart flashed two near-term bearish patterns: a bearish key reversal bar and a bearish outside bar. Both patterns develop after a strong rally and tell traders that the recent run-up is signaling exhaustion and lower prices may be ahead for the short term.
More significantly, at the April 17 close, Profit Scanner powered by Recognia identified a bearish head-and-shoulders top pattern had emerged on CMG’s chart.
CMG’s head-and-shoulders top is expected to resolve in approximately 45 trading days, with a downside target of $448 to $432 — levels that are 13% to 17% lower than CMG’s current price.
Click to Enlarge Apparently, it’s not all fun and games at toymaker Mattel (MAT). The company reported lower sales and a disappointing loss of 3 cents per share, coming in well below expectations for a positive 9 cents per share. Mattel cited a “challenging” retail environment for the setback.
Not surprisingly, MAT’s stock charts also indicate a challenging course ahead for the intermediate term (six weeks to nine months).
At the April 17 close, a bearish descending continuation triangle appeared on MAT’s chart, signaling a downward course for the next several weeks.
MAT’s descending continuation triangle put a downside target for the stock at $33.40 to $34.20, which is expected to resolve in approximately 25 trading days. A move to these targets represents share prices that are 9% to 10% lower than current levels.
While classic technical analysis patterns do not appear on every stock’s chart after earnings or other significant events — and, in fact, many stocks can go weeks or months without clear technical patterns developing on their charts — often short-term patterns or other indicators emerge which can signal future technical events to traders.
Reviewing the list of Thursday’s earnings releases, several stock charts are worth monitoring as they might turn into more significant events for the following big-name stocks. We looked at two in specific:
Click to Enlarge In recent trading days, General Electric’s (GE) chart has flashed several bullish indicators, indicating the stock price may easily overcome its negatively-perceived earnings.
Click to Enlarge And oil titan Schlumberger (SLB) gave analysts ambiguous results with earnings and revenue that were up, while disappointing on revenue. Investors also seem unsure where to take the stock, with SLB’s prices moving down, but only by 1%, after the announcement.
SLB’s charts may give traders another clue to work with — at least for the short term. At the April 17 close, SLB’s chart indicated three distinct bearish events that could develop into more significant patterns.
Profit Scanner powered by Recognia can help traders of all levels uncover these signals to determine the best timing to buy. Or use Profit Scanner’s technical insight to validate your own trading ideas. See how easy this powerful tool is to help you uncover hidden opportunities in the market.
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