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3 Stocks to Trade on Quarterly Earnings

stocks to trade - 3 Stocks to Trade on Quarterly Earnings

Source: Shutterstock

There’s a lot at stake for companies these days. But with quarterly confessionals now a part of the chaotic uncertainty, some opportunities are revealing themselves. Let’s look off and on the price charts at three recent earnings movers which are shaping up to be stocks to trade right now.

So what all should be on your radar? Well, the U.S. presidential election is less than a week out. Covid-19 has ramped up into a full-blown second wave. Given the polarized political climate and continued impact of the coronavirus, doubt abounds on Wall Street. And with earnings season now in full swing, that sense of ambiguity has only grown.

It’s not exactly a secret a company’s latest financial report can be a volatile and tricky event. Big paper profits or standing losses can literally be erased overnight… or not. There just simply is no one-size-fits-all reaction to earnings events. That means knowing which of these stocks to trade and how to trade them is a difficult task.

But in a report’s aftermath, occasionally the results and reaction add up to a much more interesting and calculated opportunity. And today, three very recent earnings stocks are warning investors, in a good sort of way, that it is time to pull the trigger.

  • Advanced Micro Devices (NASDAQ:AMD)
  • American Airlines (NASDAQ:AAL)
  • General Electric (NYSE:GE)

Stocks to Trade: Advanced Micro Devices (AMD)

Advanced Micro Devices (AMD) into key pattern support zone

Source: Chart by TradingView

The first of our stocks to trade is Advanced Micro Devices. This one is shaping up as a terrific opportunity to buy the dip. The semiconductor outfit delivered outstanding results yesterday, only building on the case that AMD is now one of the industry’s strongest and smartest competitors alongside Nvidia (NASDAQ:NVDA) and Intel (NASDAQ:INTC).

More than a couple Wall Street pros cheered the top- and bottom-line beat — and the fact AMD raised its full-year earnings guidance to predict 40% sales growth. CNBC’s James Cramer went so far as to say AMD stock is a steal. Another advisor on Trading Nation sees the company as an “absolute beast” with its Xilinx (NASDAQ:XLNX) acquisition.

With investors apparently reacting bearishly to AMD’s purchase of Xilinx, shares have entered an attractive-looking support and pattern zone. From its early September all-time high, this earnings stock has developed into a potential W or high-level double-bottom pattern. Moreover, shares have just entered a key support area for a second pivot to form between $71-$77.

I’m already in it to win it as part of a hedged, core stock collar holding. And for investors looking to buy on weakness, given a currently out-of-position stochastics and the fact the low end of pattern support is roughly 8% beneath the current share price, I’d recommend similar positioning as a smarter steal in this stock to trade.

American Airlines (AAL)

American Airlines (AAL) bearish monthly confirmation of pending crash

Source: Chart by TradingView

The next earnings stock to trade is American Airlines. And this one looks like a big-time stock to short. Already widely seen as one the airline industry’s most at-risk operators due to an iffy debt structure, lease costs and missteps by management, Covid-19 has obviously worsened AAL’s tricky situation.

Last week’s earnings report didn’t miss forecasts, but AAL’s mounting losses and whopping cash burn of $44 million per day are bearish eye openers. At a minimum, the results appear to reinforce a frank warning the “world has changed” from Warren Buffett this past spring.

On the price chart, investors initially bought into the earnings beat. But in the past few days buyers have quickly turned toward the emergency exits. Technically, Wednesday’s modest losses have challenged June’s massive and bearish shooting star candlestick pattern. With the very real possibility of stochastics stalling just above oversold territory, preparing for a crash next year makes sense.

With the next area of support near $2.50 and the lows of the 2008-2009 financial crisis, for this stock to trade I’m recommending the May $9 put. I would also suggest a 50% money stop to further contain unwanted upside exposure while positioning for massive bearish profits..

Stocks to Trade: General Electric (GE)

General Electric (GE) monthly double bottom confirmation to buy

Source: Chart by TradingView

The last of our stocks to trade is General Electric. The company isn’t hobnobbing with Apple (NASDAQ:AAPL) and other trillion-dollar club members Alphabet (NASDAQ:GOOG, NASDAQ:GOOGL), Microsoft (NASDAQ:MSFT) or Amazon (NASDAQ:AMZN). But things are looking up.

For headline hawks, this morning the company issued a surprise quarterly profit and positive cash flow tied to cost cutting and improvements in its power and renewable energy businesses. It’s great news, but not the end of the story. The longer-term monthly price chart looks compelling as well!

For technical traders, GE’s report has resulted in a decisive shot at bears overstaying their welcome. Today’s gains of around 6% are signaling a second-chance double-bottom entry that has formed modestly above GE’s financial crisis low. And with a bullishly diverging stochastics crossover formation to confirm the candlestick pattern low, this stock to trade is ready to bring good things to life for shareholders with an outright purchase today.

On the date of publication, Chris Tyler held positions in Advanced Micro Devices (AMD) and its derivatives, but no other securities mentioned in this article.

Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. 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.

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