Tax preparation firm H&R Block (HRB) reported surprisingly pleasing fourth-quarter earnings before the start of Wednesday’s trading. The result was a jump in HRB stock, which left a bullish mark behind on both the multiyear and near-term charts.
H&R Block earnings from continued operations came in at $3.36 per share, up 37% year-over-year and beating analyst estimates by 13 cents. Meanwhile, revenues for Q4 were $2.56 billion, up 16% and better than the consensus expectation for $2.49 billion.
In fiscal year 2014, H&R Block focused more on its core business of tax preparation, selling off its brokerage and banking businesses this spring. The company prepared 13.6 million assisted tax returns in its fourth quarter, which is about 900,000 less than the year prior.
Nevertheless, H&R has a strong hold on tax preparation, and investors cheered its focus on this core business. The final result was a 4%-plus rally for HRB stock on a spike in volume.
HRB Stock Charts
From a technical perspective, the below weekly multiyear chart paints a classically bullish picture for HRB stock, but it is important to keep the time frames straight.
H&R Block shares didn’t bottom with the broader market in early 2009, but rather made a lower low in October 2010, which then ultimately proved to be the bottom. Percentage-wise, HRB stock then didn’t really begin to move higher until the summer of 2012, which later that year led the stock to break lateral support and ultimately gave way to a sharp move up to the multiyear diagonal resistance line in early 2013. The push then continued and led to a major break of this diagonal resistance line, which in turn morphed into a roughly 15-month consolidation phase (so far) above previous resistance.
This type of rally-and-consolidate price action is bullish.
On the daily chart, HRB stock — thanks to Wednesday’s jump — is right back at the upper end of this consolidation range. The price action on Wednesday was such that the stock gapped higher at the open, retested a little lower intraday but ended up closing the day near the upper end of its range.
Barring any quick reversal of yesterday’s rally, this now favors an ultimate break higher and out of the range for H&R Block shares.
Depending on one’s time frame, traders can either wait for a break past the $32.45 area to buy or already begin to initiate a position and then add upon an eventual breakout, if and when it occurs.
HRB stock stands a good chance to move toward the $35 area in coming months, once a breakout has been confirmed.
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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.