Earnings beats sound good on paper, but profiting from a report is a different matter entirely. And in this season’s crop there are three stocks to buy in particular that have the goods both off and on the price chart to make you solid profits.
Specifically, the stocks I have in mind are IBM (NYSE:IBM), Tyson (NYSE:TSN) and Pinterest (NYSE:PINS).
Earnings season is usually a time where Wall Street waits on pins and needles for the latest report from a market bellwether such as Apple (NASDAQ:AAPL), Bank of America (NYSE:BAC) or today’s Disney (NYSE:DIS) report. But this year, that show has been upstaged.
Over the past week, macroeconomic and geopolitical risks have taken the spotlight. A questioned rate cut, surprise tariff escalation and currency manipulation accusations have all come into play. And as market action has turned quickly fearful it does beg the question, are companies with earnings beats necessarily good stocks to buy?
The adage “a rising market floats all stocks” is a fairly well-respected generalization when it comes to investing. As such, it’s easy to see why those bearish headlines have been receiving all the attention. But don’t let that stop you from buying strong quarterly confessionals in IBM stock, TSN and PINS. In fact, use them to your advantage. Here’s how:
International Business Machines (IBM)
IBM is backed by a recent earnings beat after its recent acquisition of Red Hat (NYSE:RHT) supported its emerging growth and an important pivot into software and the cloud market.
Technically, the report vaulted IBM stock above a second layer of longstanding downtrend resistance within a multi-year “W” or double-bottom shaped base. Now, with this week’s headline fears taking shares back down into a testing position of prior resistance, the base’s 50% level and uptrend support from its December low, IBM is a stock to buy on weakness.
IBM Stock Trade
My advice for IBM is to purchase IBM stock on a move back above the support zone as shares clear $141. I’d caveat buying the reversal with IBM holding above $134.50. That’s roughly the low of the support area and should be respected or risk an increased chance of a bearish trend developing and much larger losses.
Tyson Foods (TSN)
Tyson Foods is another name that’s backed by a solid earnings beat this week, as well as news the company is distributing a new plant-based chicken nugget option to more than 4,000 grocery stores this fall under its Raised & Rooted business.
Alternative meat products are a huge growth market that has made headlines recently with Beyond Meat’s (NASDAQ:BYND) amazing IPO debut. It’s also an area where Tyson Foods is obviously well-positioned to enter.
Technically, Wall Street is very agreeable with TSN stock’s double serving of good news. Shares have broken out of a massive pair of cup-shaped bases this week. Now and with the latest macro headlines weighing in on sentiment, TSN is a key stock to buy as it tests a very well-built breakout supported by a bullish, oversold stochastics crossover signal.
TSN Stock Trade
My recommendation for TSN stock is to purchase shares today. The pullback has tested support and puts this entry within a couple percent of this successful challenge.
To contain downside exposure and given the market’s elevated volatility, I’d place a stop beneath the recent low of $78.66. This minimizes risk to just under 7% and keeps bulls out of harm’s way in the event of a larger technical failure.
Pinterest (PINS)
PINS stock is the last of our three stocks to buy. The hugely popular web-based visual discovery platform knocked its earnings confessional out of the ballpark late last week. And Wall Street noticed as investors spiked shares higher by nearly 19%.
Technically, the initial enthusiasm in PINS resulted in shares jumping aggressively above the base’s 50% and 62% resistance levels and straight into a challenge of its pattern and all-time-high. Now and courtesy of today’s external headline threats, this stock is forming a small and constructive consolidation with which to purchase shares.
PINS Stock Trade
My recommendation for PINS stock is to put shares on the radar for buying in one of two ways. Given the cup-shaped base, gaining long exposure on a confirmed breakout is a classical approach to buying a growth stock like Pinterest. Usually though, this type of entry occurs during healthier market action.
Alternatively and in today’s environment, buying shares on weakness down toward the 62% level, if PINS can also put together a daily chart reversal pattern, is approachable.
For a breakout entry, using a common 7% to 8% stop-loss is advised. With the latter buy-on-weakness method, simply placing an exit slightly beneath the pattern bottom or just below the base’s 62% level makes good sense.
Disclosure: Investment accounts under Christopher Tyler’s management do not currently own positions in securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
