The biggest day of the third-quarter earnings season is upon us as this afternoon’s reporting will be a who’s who of technology and large-cap companies. So far, the market is punishing companies that miss their expectations more than rewarding those that beat, mostly on behalf of the fact that the major indices are trading at their highs. In other words, traders are using earnings as a reason to trim exposure to the market.
Advanced Micro Devices, Inc. (AMD)
AMD shares have been taking it on the chin after a less than bullish earnings report missed analysts’ expectations for the stock. Now, we’re seeing traders react to negative technical triggers. Is the stock a buy now, or ready to move lower?
- The initial post-earnings move cracked the lower Bollinger Band. Today, Advanced Micro Devices is seeing some recovery buying, but failure to break back above $12.33 at the close will strengthen the “sell” signal.
- AMD shares had seen a “buy the rumor” rally that ran over the cliff and broke through an already weak 50-day moving average. Any bounce is going to run into significant resistance at this trendline, $13.02.
- Advanced Micro Devices shares are now threatening to break through their 10-month moving average. AMD stock has found support at this trendline each of the last five months, meaning a break below will mean increased bearish selling on the stock.
Apple Inc. (AAPL)
Apple won’t release their earnings until Nov. 2, next week, but the analysts and traders are already questioning whether the sales figures for the iPhone 10 will hit expectations as the lower versions are still garnering attention.
The charts show a technical battle that is favoring the bears for now.
- The “trend” is unfriending AAPL stock, as the 50-day moving average is in the process of rolling over into a neutral-to-bearish outlook. This will pressure shares even if Apple were to best analyst’s earnings expectations.
- The Chande Trend Meter (CTM) for AAPL shares has moved into a neutral reading as the stock has seen consistent selling pressure on rising volume and lower volatility.
- $158 has been building-up to bring chart resistance for the shares. This level dates back to the consolidation that AAPL stock went through in August. Failure to break above this price will maintain selling pressure all the way up to earnings day.
Amazon.com, Inc. (AMZN)
One of the biggest companies reporting today after the close is Amazon. AMZN stock has been a laggard against the market as its shares continue to trade in a volatile range. Frankly, the stock is sitting in a situation that should place the bulls and the bears on the sidelines ahead of the announcement.
It’s a technical coin toss on the direction, but here’s what you want to watch for after the report.
- At $975, Amazon shares are trading near the mean of their six-month long trading range. This is telling the chart watchers that traders and investors aren’t willing to make a call on the next 5-10% move, despite the approaching earnings. This is normally not the case for AMZN.
- Amazon shares are making a pattern of lower highs and lower lows from a long-term perspective. This tells us that traders and long-term investors are moving away from AMZN stock on rallies. This is evident since the stock is bloated with bulls, meaning Amazon is overcrowded — a very dangerous situation.
- Here’s how it plays out for an overcrowded stock like AMZN:
- A positive earnings report will see Amazon shares rally to $1,015 and then turn lower as the bandwagon bulls jump off to lock-in profits. From there, the stock likely wanders lower with little fundamental drivers remaining.
- A negative report will cause AMZN shares to break through chart support at $940 and likely target $850 as the next “line in the sand” for technical support.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.