Earnings season is getting into the swing of things and is likely to start throwing some stocks around.
Obviously, Netflix will grab the lion’s share of the media headlines for the next few days, but there are other companies like Microsoft Corporation (NASDAQ:MSFT), Baidu Inc (ADR) (NASDAQ:BIDU) and … OK, we’ll cover Netflix, Inc. (NASDAQ:NFLX) too, since it may be flashing a buy signal for the technical traders.
Microsoft Corporation (MSFT)
Microsoft is set to announce their earnings results later today and the stock is setting itself for a “sell the news” situation based on the technicals.
When you look at the Microsoft chart, it has been a great stock for the traders in that the range has been well defined, unfortunately, by a declining trend at the high range. As we approach earnings, the stock finds itself at this trendline once again, placing a potential shadow over the upcoming data.
In addition to the overhead resistance at $54 from this trendline, Microsoft shares are firmly in an overbought condition, suggesting that the short-term trade has been crowded with buyers and very little selling pressure may turn the stock around towards the $49 level.
Earnings will be the catalyst here, but with an overbought Microsoft sitting at the top of the range, it is likely that the traders will be looking for an excuse to start selling the stock back towards the bottom of its range.
Baidu Inc (ADR) (BIDU)
Online search company Baidu has been trading in what we refer to as a compressing range or a pennant formation since November as the highs and lows of its trading range have been growing closer. For the traders out there, this means opportunity as the stock is setting up for a breakout.
The recent consolidation at $160 represents the lower end of this tightening range and looks to have built as a stronghold of support as the company approaches an earnings report next week. This is important, as the report will be the catalyst for as to whether the breakout is to the up- or downside.
The 200-day trendline for Baidu recently set itself into an ascending pattern, indicating that the shares are gaining some momentum to the upside. In addition, the 50-day trendline is just overhead at $167. These breakouts usually play out with a break above a trendline such as the 50-day, followed by an increase in buying volume that could break Baidu through $175 which would set the stock free for a nice bullish ride.
Netflix, Inc. (NFLX)
Finally, it is hard not to talk about Netflix after last night’s report, but there are some significant technicals in play on the shares that should be watched for a buying opportunity.
Shares are trading over 13% lower, at the $85 level. Historically, the stock is a HUGE mover after earnings. The average one-day positive move is 18.7% and the average negative move is -12.10%, so today’s move falls within the range of typical activity on this volatile name.
The last six months have seen three occurrences in which Netflix shares have tried to break through the $85 mark, only to be heavily defended by buyers of the shares. As of now, it appears that we are ready to see the same as some buying has already started to move into the market this morning.
In addition to the hard floor at $85, Netflix shares have SHOT into oversold territory on this move. Similar signals have been great short-term opportunities to buy the stock for quick gains.
Finally, Netflix’s 20-month moving average sits at $91.84. For those wishing to see some confirmation that the stock really will make a tradable move to the upside, this trendline will be the indicator.
A move back above the 20-month will keep Netflix in its long-term bullish trend and target higher prices over the next six months.
As of this writing, the Johnson Research Group did not hold a position in any of the aforementioned securities.
