Earnings season is hitting all cylinders this week, making it hard to avoid talking about several stocks as 170 of the S&P 500 companies are set to present their quarterly results to the market. Earnings season often offers traders great opportunities based on the charts and the Street’s expectations for earnings, but finding the right chart can be hard this time of the season.
Today’s three stock charts look at a favorite in the insurance sector Cincinnati Financial Corporation (NASDAQ:CINF), as well as Twitter Inc (NYSE:TWTR) and Ford Motor Company (NYSE:F). All of these companies will provide quarterly results this week that should forge trading patterns according to the charts.
Cincinnati Financial Corporation (CINF)
The insurance sector has been outperforming the market of late as the thought of higher interest rates has investors, correctly, anticipating stronger balance sheets and performance. Cincinnati Financial has been in a leadership role in the sector for years on its business strength, resulting in an enviable stock chart.
CINF shares “tumbled” last week as they traded ex-dividend; they were also trading just below their 50-day moving average. We always stress the importance of the trend of this moving average as it is the simplest barometer of technical health. Therefore, it’s concerning that Cincinnati Financial’s 50-day moving average is starting to decline.
CINF shares are overshold, as of Friday’s close, signaling that we are going to see buyers enter the market this week. This comes as earnings will hit the wire on Tuesday after the close. Earnings results have been bullish for this leader and should snap the Cincinnati Financial’s 50-day back into an ascending pattern again.
Barring any earnings disaster, CINF’s chart suggests a $78 range after earnings.
Twitter Inc (TWTR)
With all that has gone on over the last quarter, how could you not look at Twitter ahead of its earnings on Thursday after the close.
TWTR has gone through numerous suitors walking away from it, which in our experience means that we’re more likely to see the earnings report reflect something positive this quarter, as the company is still likely to be attracting either additional suitors or the confidence of investors.
Twitter shares have seen positive earnings results the last two quarters and even some strengthening charts — this is still the case. Last week, after a terrible two weeks of declines, TWTR shares finally started drawing what appears to be a tradable bottom at $17.
Twitter shares benefited from oversold signals from three different indicators, support at an options strike that holds large open interest and from the 200-day trendline, which TWTR shares are now trading back above.
Earnings have been a coin toss over the last year for Twitter, but the charts are suggesting that anything positive from Tuesday’s report will have some room to move to the upside. Sentiment is also fairly negative, as it appears that everyone feels that Jack Dorsey and TWTR’s management are unable to pull anything off.
The smallest sign of success here will catapult Twitter shares to their media chart level of $20 and more likely in the $21 range.
Ford Motor Company (F)
Ford is one of the tougher companies to understand upcoming earnings and their potential affect. F stock has been declining as consumer retail and discretionary spending slides. This is a sign that consumers are slowing their spending, which is not great for companies like Ford.
In addition, the idea of rising interest rates has been squeezing the market for automobile buyers for the last two quarters, as everyone wants to make sure that they take advantage of the low interest rate financing before its gone. So where does that leave F stock?
Ford’s chart is an inverse of what any bullish investors would want to see. Slow, deliberate moves to lower prices on average volume. In other words, the bearish trend for F stock is solidly in place.
There’s a key technical line that traders need to be aware of — $12. The $12 mark has been solid chart support the last three times Ford shares have challenged it. This week, failure of this critical round-numbered chart support will spell trouble to traders, to the tune of 17% or so downside as the next level for F shares to target based on the technicals is $10.
This week’s earnings couldn’t be more critical for Ford shares and traders will be wise to hedge the downside move on a potential break of $12 that leads to $10.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
