With the din of earnings season fading in the background, the winners and losers of the quarterly dance are now on full display.
According to Factset “the blended earnings decline is -7.1%” for the first quarter in the S&P 500, which marks the fourth consecutive quarter of year-over-year declines in earnings. Yuck. You have to go all the way back to the dark days of 2008 to find the last episode of such a persistent earnings slide.
But not all companies delivered coal to the stockings of shareholders. Some standouts soared, sputtering economy notwithstanding. Indeed, these three beauties are boasting some of the best-looking charts on Wall Street. And, bonus, low risk setups have cropped up in all of them beckoning to opportunists everywhere.
If you think the good times continue to roll for stocks that shined during an otherwise dingy earnings season, consider Amazon.com, Inc. (AMZN), Facebook Inc (FB) and Freeport-McMoRan Inc (FCX) all buys.
3 Earnings Winners Ready for a Second Wind: Facebook Inc (FB)
The technology sector had a dismal showing this earnings season. Down gaps multiplied, taking the Nasdaq Composite Index into a full-fledged downtrend. Facebook, however, bucked the trend and ripped higher on its announcement, tagging a new all-time high in the process.
FB stock’s trend is flashing bullish signals galore. At $120, FB is perched above all major moving averages. Blue skies loom above, and Facebook boasts the bevy of benefits that come when a stock reaches an all-time high.
Chief among them is the absence of any overhead supply. 100% of shareholders hold profitable positions and anyone unfortunate enough to be short the stock is sitting on an increasingly painful position.
Bottom line: the chart says FB wants higher.
Since its earnings gap, Facebook has spent its days consolidating in bullish fashion. Now that the gap has been digested, higher prices are beckoning. And if Friday’s bullish engulfing candle is any indication FB is responding with vigor.
Buy FB July $120 calls on a breakout over the $120 price level.
3 Earnings Winners Ready for a Second Wind: Amazon.com, Inc. (AMZN)
Amazon followed in Facebook’s footsteps with an up gap of its own. Though it hasn’t yet scored a new all-time high, it’s close. The December peak of $696 beckons, a mere 3% away. Outperformance has accompanied AMZN since it bottomed in early February.
If you’re a believer that strength begets more strength, that buyers flock to winners like sycophants to a rock star, then look for AMZN stock to continue rallying in the months ahead.
AMZN survived last week’s retest of its gap area. The $655 price test delivered Friday’s sharp up day, as buyers sallied forth to scoop up shares on a slight dip. And that buying aggression following such a minor drop reveals the legion of sidelined bulls looking to get in on the action during any and all price sales.
Buy the AMZN July $675/$695 call spread for $9.60 or better. The risk is limited to the initial $9.60 and will be lost if AMZN sits below $675 at expiration. The reward is limited to $10.40 and will be captured if AMZN stock can rise above $695 by expiration.
3 Earnings Winners Ready for a Second Wind: Freeport-McMoRan Inc (FCX)
FCX rounds out our list, and while its earnings were actually abysmal, the stock’s reaction was quite bullish.
As one of the most popular stocks in the metals and mining industry, FCX is a go-to stock anytime the bulls cobble together a rally in the space. And since commodity stocks have been all the rage recently, Freeport-McMoran has thrived.
Last week’s profit taking hitting metal stocks has ushered in a pullback for FCX to its rising 50-day moving average. This is as good a spot as any for metal bulls to initiate new positions. If the stock can take out Monday’s highs ($11.25) in the days ahead consider buying the July $10 call option.
At the time of this writing Tyler Craig held bullish option positions in FB.
