Earnings season is starting to fracture the market more than it was a few weeks ago as earnings results are starting to separate performance and are pulling technicals into play more heavily. As is normally the case, we’re seeing a lot of companies that are presenting trading opportunities after their earnings announcements, as their shares have made dramatic moves before or after earnings results that are now likely to play catch-up with the actual results.
Today’s three stock charts look at two great post-earnings plays with Intel Corporation (NASDAQ:INTC) and Lockheed Martin Corporation (NYSE:LMT) based on the technicals along with recent positive earnings results. On the other side of the coin, a poor report and failing technicals have Kimberly Clark Corp (NYSE:KMB) shares have turned into the proverbial “falling knife” that traders and investors would be wise to avoid.
Lockheed Martin Corporation (LMT)
Off of another positive earnings season, Lockhead Martin shares are set to make a strong technical move above their 200-day moving average, this after spending the last two weeks trading just below the key trendline. The jury has been out on where the earnings and outlook would take LMT stock, but the technicals and fundamental story still back a bullish outlook.
Today’s move above the 200-day will conclude Lockhead Martin stock’s oversold status as buyers grab shares while they remain a relative deal. The last time that LMT shares spent a similar amount of time below their 200-day moving average was July 2015. A better than expected earnings announcement shot the shares 8% higher after they had already emerged from this support. Today’s break higher may be more significant, but there’s a technical catch.
More significant is the recent pullback to the 50-week moving average, the first since February of this year. This has been staunch support for Lockheed Martin shares since the long-term bullish rally was put in place in 2013. The positive earnings report along with the positive fundamental story of either presidential candidate being bullish for defense stocks makes LMT a bullish technical and fundamental target.
Intel Corporation (INTC)
Was Intel’s number really that bad or were the expectations too high? The latter is the case as the semiconductor’s quarterly results were better than expected and they posted inline guidance. So why is INTC stock down? Sell the news … it’s that simple.
Intel shares saw a nice “buy the rumor” rally ahead of their earnings as the Street got whipped into a frenzy about the chip maker’s results, then the results were just a little better than expected. From there, INTC shares followed a “sell the news” move that has taken them into a classic post-earnings buying situation.
Intel shares are hovering in oversold territory as the stock is now finding trendline and chart support at the same time. Trendline support for INTC shares is kicking in at the stock’s 20-week moving average, currently at $35.24. At the same time, Intel’s chart identifies the $35 level as chart support, serving as resistance in Nov. 2015 and then the “neckline” of a head-and-shoulders formation in early 2015.
We’re expecting to see the 20-week moving average and $35 level kick in along with the short-term oversold condition to give INTC shares a boost back towards the $40 level, especially as other technology companies continue to report results that are in-line and represent a stronger market than the market determined from Intel’s results.
Kimberly Clark Corp (KMB)
Kimberly Clark stock is getting slashed as the company’s report came in less than expected and the company also dropped its guidance. Interest rates, stronger dollar and fluctuating consumer spending all contributed to the earnings report, which had KMB stock slashing through technical support.
Kimberly Clark shares had already rolled-over into intermediate-term bearish territory in mid-August, and now the technical event of the missed earnings report has KMB shares as a falling knife that traders should avoid.
According to our charts, the break through Kimberly Clark’s 20-month moving average, located at $120 was the last line for the bulls to see held. Now, try to time KMB as a falling knife until it gets to the $100 level. Don’t try to catch this one until then.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
