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3 Stocks to Buy that Won on Earnings

Every quarter, earnings announcements arrive as a reality check for investors. For some, the news provides a rude awakening. For others, it brings instant overnight profits. Today we’re looking at three stocks to buy that departed their recent quarterly reports as big winners.

The beautiful thing about a positive response to earnings is it’s a gift that often keeps giving. The optimism and excitement surrounding the beat usually linger. Its staying power continues to buoy the stock up for weeks and months to come. In the wake of the glowing report, additional bullish price patterns emerge that provide trading opportunities.

This week I scanned my list of recent earnings winners and found three setups worth highlighting in the following stocks.

  • Nike (NYSE:NKE)
  • (NYSE:CRM)
  • FedEx (NYSE:FDX)

Let’s take a closer look at their charts to identify the key levels to trade off of. Then, I’ll share my preferred options strategies for profiting.

3 Stocks to Buy that Won on Earnings: Nike (NKE)

Nike (NKE) stock showing bull retracement

Source: The thinkorswim® platform from TD Ameritrade

Nike rocketed higher on Wednesday after crushing earnings estimates. Shut-in shoppers took to the internet to spend their dough, sending Nike’s online sales to the moon. Its digital sales grew 82%. Investors cheered the numbers by bidding NKE stock up 9%.

And it’s not like the stock was languishing ahead of the report. Since the day after June’s announcement, Nike was already up 25%. Some profit-taking has arisen following the up-gap, and it should be cheered. The retreat is providing a much more palatable entry for those hesitant to chase. While another down day or two could be in the cards, we’ve retraced enough to where I’d begin entertaining bullish ideas.

The next two support zones to watch are $120 and $117. We may not even pull back that far, but if we do, I’d be a double-fisted buyer.

The Trade: Buy the Nov $125/$130 bull call spread for around $2.

FedEx (FDX)

FedEx (FDX) stock chart showing looming breakout

Source: The thinkorswim® platform from TD Ameritrade

Increased online shopping means more packaging zipping around the globe. And that translates into bigger profits for the likes of FedEx. Earlier this month, the shipping juggernaut smashed earnings expectations and gapped 7% higher overnight. And that was after running nearly 60% over the past quarter.

Prices pulled back to the 20-day moving average and have since rebounded. Friday’s 2% rally shows buyers are continuing to press their advantage, and I think a breakout over the earnings day high of $256.18 is right around the corner.

With earnings in the rearview mirror, implied volatility has dropped down to the 18th percentile of its one-year range. That makes call spreads a smart trade for bulls.

The Trade: Buy the Nov $260/$270 bull call for around $3.50. (CRM) (CRM) chart showing falling wedge pattern

Source: The thinkorswim® platform from TD Ameritrade rounds out today’s stocks to buy with a falling wedge pattern on the cusp of completion. Last month’s earnings report was a boon for CRM, delivering a one-day gain of nearly 30%. Their earnings per share more than doubled from the prior quarter.

But it hasn’t been immune to the recent rotation out of tech stocks. From peak to trough, CRM has retreated 18% to create a compelling chance to buy the dip. While I wouldn’t be opposed to a gap fill, I don’t think we have enough selling pressure for the drop to go the distance.

The series of lower pivot lows shows the pullback is slowing in momentum. I think it’s just a matter of time before buyers return, and we get an upside breakout. At the 33rd percentile, implied volatility is high enough to make bull puts interesting if you want a higher probability play.

The Trade: Sell the Nov $200/$195 bull put for around 90 cents.

On the date of publication, Tyler Craig did not have (either directly or indirectly) any positions in the securities mentioned in this article.

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