A battle is taking place for Comcast (NASDAQ:CMCSA) shares this morning.
The contest comes after the media giant reported its second-quarter earnings, which topped expectations. After digging into the numbers below, we will explore the impact of today’s volatile session on the CMCSA stock chart. Then we’ll build out a trade.
Comcast Earnings Numbers
Comcast raked in adjusted earnings per share of 69 cents on $23.72 billion of revenue. The Street was expecting earnings of 55 cents on $23.57 billion in sales. So, chalk this up as a solid beat. Elsewhere, the company added 323,000 new high-speed internet customers, beating forecasts of 247,000.
As always, it isn’t the numbers or news that matters, it’s how the stock reacts. And so far, the response has been muted. We’ve seen plenty of pushing and shoving, but neither party has been able to gain the upper hand.
In premarket trading, CMCSA stock spiked to nearly $47, but it quickly fizzled. Once the opening bell rang, we saw a wicked, whippy candle form that marked the high and low of the day. Since then, the shares have been hovering near unchanged. This is a session that, I suspect, will leave both bulls and bears dissatisfied.
Bulls wish the shares were up near their premarket highs, not wrestling around unchanged. And bears are looking at the sea of red in the rest of the market following the horrific GDP print, wishing CMCSA stock was selling off more in sympathy.
To be fair, the options board wasn’t exactly pricing in fireworks for this morning’s announcement. The expected move was only $1.51, or 3.4%. Still, hovering near a 0% change on the day makes this a perfect outcome for options traders swinging short volatility trades into the event.
CMCSA Stock Chart
Comcast shares have rallied alongside the wider market recovery over the past few months. Since the March low, CMSCA has risen 39%. We’ve yet to return to all-time highs, but it’s getting close.
The weekly trend is pointing higher and has now climbed back above all major moving averages. My primary concern is the large congestion area between $44 and $47. There was a lot of back and forth in this zone last year that could bring supply into the market, slowing the trend.
It may take a bit to get there, but there’s no doubt the January peak of $47.74 is our next target. The daily time frame shows we’ve already started to chew our way through the potential resistance.
The falling 200-day moving average is unfortunate, but for a shorter-term trade, it’s the 50-day and 20-day averages that carry more weight. And they’re both rising in confirmation of the past month’s price jump.
The hardest part for me about new bull entries is going to be today’s wide-bodied candle. It doesn’t exactly lend itself to a low-risk entry, and it’s making the chart messy in the short run.
If we pulled back to the 20-day moving average near $42, the setup would be better. You can either wait for that or take today’s trade idea now and recognize you may have to sit through a pullback if profit-taking emerges.
With earnings out of the way, implied volatility fell to the 11th percentile of its one-year range this morning. That makes options cheap, and strategies like a bull call attractive.
The Trade: Buy the October $42.50/$47.50 bull call spread for around $2.35.
The max risk is $2.35, and the max reward is $2.65.
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