Despite a 1% gain on Tuesday, U.S. stocks still seem a bit wobbly. Broad market indices faded into the close on Wednesday; even with help from Apple (NASDAQ:AAPL), the most valuable U.S.-listed company, the S&P 500 closed modestly in the red.
Certainly, there’s no reason to panic. Another strong earnings report, this one from Microsoft (NASDAQ:MSFT), may help equities in trading Thursday. Coronavirus fears led to sell-offs on Friday and Monday, and even with that pressure major indices are modestly off all-time highs.
Still, as we’ve noted in this space before, there are some signs of resistance in the broader market. In that context, Thursday’s big stock charts focus on three names, all internet stocks, which are also facing resistance.
Each company has an earnings report of its own on the way, which could provide a catalyst for upside. Of course, some help from the broader market wouldn’t hurt, either.
Twitter (NYSE:TWTR) stock plunged in October after a third quarter earnings miss. After that disappointment, fourth quarter earnings obviously are key from a fundamental standpoint. As the first of Thursday’s big stock charts shows, it’s important from a technical perspective as well:
- TWTR stock has a clear path to a breakout if the recent rally can continue. Resistance has held at $34, after providing support last year. Clearing resistance also would signal a bullish exit from a triangle pattern and a descending wedge. There seems to be a path to at least the 200-day moving average above $36 if TWTR can keep its momentum going.
- That remains a reasonably big ‘if,’ however, particularly with volume light in recent sessions. And so the pressure likely rests on the Q4 release next week. It’s not just fourth quarter earnings that will matter, either: Twitter should detail its guidance for 2020 as well.
- For multiple reasons, then, the next seven trading sessions are huge for Twitter stock. A big quarter erases the bad taste from Q3, while there’s a technical path to a breakout toward 2018 highs. Another disappointment, and Twitter’s longer-term story looks weaker, while resistance is confirmed. Indeed, the options market is pricing in a roughly 10% move in Twitter stock by next Friday and that makes some sense. TWTR has a big stretch ahead.
There’s a lot going on with GoDaddy (NYSE:GDDY), the second of our big stock charts. Net/net, the technical picture looks modestly concerning, but it may be earnings that determine near-term direction:
- GDDY established a bullish inverse head-and-shoulders pattern, but the resulting gains played out as the stock neared early August highs. More recent trading suggests the potential for a bearish inverted cup-and-handle, particularly if the stock shows weakness in the next few sessions. An ascending narrowing wedge adds to the sense of caution, as it suggests a potential negative reversal. Underneath all that, however, is a key level around $67 that appears to have returned to support after providing resistance in September.
- Here, too, fourth quarter earnings, due on Feb. 13, look key. GDDY stock remains dearly valued, at 67x current 2020 consensus earnings per share estimates. There’s little room for error with that type of valuation, particularly since this is a margin expansion story: revenue should grow roughly 12% in 2019 and around 11% in 2020.
- Market sentiment will be a factor as well. Investors have been somewhat indecisive when it comes to growth stocks, selling the category off in September and October before many high-multiple names rallied at year-end. If the market as a whole turns south, the most expensive names should have the furthest to fall. That, too, adds to the caution with GDDY stock — and to the sense that next month’s earnings report is crucial.
Qurate Retail (QRTEA)
As the third of Thursday’s big stock charts shows, there’s a short-term case for Qurate Retail (NASDAQ:QRTEA). The long-term picture, however, remains cloudy:
- Technically, QRTEA is showing signs of life. Most notably, it’s at the resistance line of a narrowing descending wedge which raises hopes for a bullish reversal and a breakout. If QRTEA can catch a bid here, the 50-day moving average could provide support and suggest a path back to the 200-day moving average around $11.
Fundamentally, QRTEA is one of the cheapest stocks in the sector, at less than 5x forward earnings. But the low valuation has some logic. Qurate has been one of the few misfires from Liberty Global (NASDAQ:LBTYA,NASDAQ:LBTYK), as its acquisitions of online retailer Zulily and home shopping pioneer HSN have misfired. As a result, QRTEA stock has been a classic value trap that has disappointed investors for years, as the long-term chart shows.
- Despite that history, investors are willing to buy the dip. The company has a chance on Feb. 26 to reward investors for taking on that risk. At this valuation, QRTEA can soar if Qurate can change sentiment and provide a clear path to at least stabilized earnings. Of course, the company has tried, and failed, to do so before.
As of this writing, Vince Martin has no positions in any securities mentioned.