The market is reacting to this morning’s earnings results with some mixed trading as a number of companies with positive results are being sold into the strength. The pattern is a familiar one as a number of stocks have been in rally mode right-up to their respective announcement. In many cases, this opens an opportunity for those watching the charts to pick up some technical bargains.
Today’s three big stock charts look at the charts of Domino’s Pizza, Inc. (NYSE:DPZ), 3M Co (NYSE:MMM) and Alphabet Inc (NASDAQ:GOOG, NASDAQ:GOOGL) as each of these companies are seeing selling in the wake of their earnings reports. Is this a good time to buy? Let’s look.
Domino’s Pizza, Inc. (DPZ)
Domino’s Pizza reported results that were better than analysts expected on both the revenue and earnings-per-share numbers. The company showed year-over-year growth of a healthy 9.5%. Despite this, DPZ stock is trading more than 8% lower as profit-takers have tee’d the stock up. The technicals indicate that this may be a chance to buy the dip though.
- Domino’s Pizza shares ripped through their 50-day moving average, but for now, the trendline is moving higher. This is an indication that we are likely to see some continued strength for the shares.
- DPZ stock is in the process of bouncing from its 100-day moving average, currently at $197. Should this trendline hold, it will signal to the technical and quant traders that the market is likely to see a bounce in the stock.
- The one-day selling spree has shot Domino’s Pizza stock into an oversold reading of its RSI, the lowest since April when the stock also tested its 100-day moving average. This double-barreled support should be enough to give traders a short-term opportunity.
3M Co (MMM)
Basic materials company 3M missed its bottom line number while beating expectations on revenue. The company also provided guidance that was in-line with the Street’s expectations.
MMM stock is trading more than 5% lower in response and testing what may turn out to be critical support that defines the difference between a short-term trading opportunity and another 5% decline.
- Shares of 3M are gapped below their 50-day moving average this morning but have been able to regain some strength to rally from their lows. For now, MMM stock had been trading sideways in a consolidation before this break, which raises concern that 3M shares may be transitioning into an intermediate-term bear trend.
- Currently, MMM stock is trying to hold on to its 100-day moving average, which sits around the $200-level. The combination of trendline and round-numbered support at this level is going to provide a litmus test for technical traders. A hold of $200 will lure buyers into the market while rejection will bring more selling.
- 3M stock’s 10-month moving average is sitting at $186. If current levels fail to hold, we are likely to see the stock decline to this next level of support, which is where our models would expect to see longer-term buyers begin to enter the mix and provide support.
Alphabet Inc (GOOG)
We talked about Alphabet shares yesterday as the stock appeared to be in the potential situation that would see a “sell the news” reaction to the company’s earnings. This is exactly the case that we are seeing as GOOG shares are trading 3% lower following a positive earnings report.
Should you buy this dip?
- Alphabet shares are grabbing support from their 50-day moving average. This trendline sits at $950. It has been clear over the last three months that the technical traders are trading this trendline heavily based on the increases in volume.
- The $950-level should also be considered as “round numbered” support for GOOG shares. We saw a consolidation at this price in June and a brief pause in the rally in May as Alphabet shares approached this price telling us the market is sensitive to the level.
- GOOG shares were overbought heading into the earnings announcement, a condition that has now seen the overhead pressure relieved by today’s selling. This will clear the way for buyers to move in with more room overhead for the next rally.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
