Earnings. It can be a well-planned circus-like event for many publicly traded companies and no matter the size or history with Wall Street. But in the aftermath of those thrills and chills, there are sometimes stronger opportunities to buy or sell short a more certain outcome as we’ll explore in three Dow Jones stocks to trade right now.
Amid the uncertainty of the novel coronavirus pandemic, political saber rattling abroad with China and an ever closer Presidential Election, one constant investors can be confident of is earnings season and its organized queue of corporate confessionals. How a quarterly report plays out is another matter entirely.
Thus far, Q2 reports have turned in a beat rate of 76% with just over 1,500 companies topping estimates. Nearly 500 companies have also missed views. Headline results are also just the tip of the iceberg. What was the size of the beat or miss? How did it compare to the whisper number? What about sales or the company’s outlook? How did investors react to the report?
It’s a lot to swallow. As such, it’s easy to see why the Dow Jones Industrial Average and its cadre of influential blue-chips are so popular in gauging the pulse of the market and the economy at large. But the venerable barometer is 30 stocks. It’s important to remember companies other than Microsoft (NASDAQ:MSFT) and Apple (NASDAQ:AAPL) whose trillion-dollar plus increasingly influence the market bellwether, aren’t the end all, say all for investors.
These three Dow Jones stocks in particular stand out:
Let’s look at what’s happening to each of these stocks that makes them worth a look today.
Dow Jones Stocks to Trade: Cisco Systems (CSCO)
Source: Charts by TradingView
Cisco Systems announced its results Wednesday evening. A profit beat of 6 cents on earnings of 80 cents was easily swept under the carpet in favor of a weakening revenue trend compounded by management’s sales warning for the upcoming fourth quarter.
Technically, a bearish drop just over 11% has provided pattern confirmation for a downward-sloping resistance line seen on the provided monthly chart. The price action also marked a second breach of a steeper uptrend dating back to 2016 and shares are now signaling a bearish stochastics crossover.
The observation is Cisco could revisit its March bottom and Fibonacci zone support from roughly $28 – $33 before all is said and done. The October $40 / $37.5 put spread priced for 55 cents is a favored way to gain limited and reduced bearish exposure to CSCO stock.
Chevron (CVX)
Source: Charts by TradingView
CVX joins the other standout Dow Jones stocks to trade after the company reported a worse-than-forecast loss of $8.3 billion and much weaker than expected sales of $13.49. Could it get any worse for the energy giant? Maybe.
Reduced guidance from Chevron’s management tied to a still challenging Covid-19 driven operating environment suggests that the company isn’t out of the woods. But investors have managed, albeit ever so modestly, to see things differently in a bullish sort of way.
Technically, and in the wake of the report, CVX stock rallied just enough to narrowly confirm a corrective pullback of 21%.
Admittedly, it’s easier to appreciate a more visible bearish topping candle put together in June and bearish price action in 2020, which overall has a rather slippery look to it. But it’s fair to say and see there’s been a lot of deep technical testing supportive of being upbeat, like only a contrarian can be.
Unlike management’s warning to Wall Street, I’d simply urge investors to use a collar strategy for stronger risk-adjusted positioning in this Dow Jones stock to trade.
Intel (INTC)
Source: Charts by TradingView
Intel, the world’s largest semiconductor company by revenues, topped profit and sales views roughly three weeks ago. But a six-month delay for its 7-nanometer chips has put the company further behind competitor Advanced Micro Devices (NASDAQ:AMD). This led INTC stock investors to drive the stock down 16.24%.
Now, INTC stock is stationed at what should prove a major inflection point. On the one hand, shares have confirmed a weekly chart test its former highs from 2000. Stochastics is also on the cusp of a bullish stochastics crossover within oversold territory. Furthermore, shares remain positioned above the chart’s 2015 and 2009 uptrend lines.
Alternatively, a failure to hold this week’s inside doji pattern low could be the beginning of a larger correction, where both trend-lines are at risk. With Intel facing company-specific problems on top of more universal Covid-19 issues, I’d say buying a weekly bottom has technical grounds. However, accumulating on weakness is another matter.
For the time being, a long Sept $50 / $52.50 call vertical for 75 cents looks like an acceptable risk-to-reward trade-off for bullish investors.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. Investment accounts under Mr. Tyler’s management own Advanced Micro Devices (AMD) and its derivatives but no other securities mentioned in this article. The information offered is based on his professional experience but strictly intended for educational purposes only. Any use of this information is 100% the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.
