Earnings spark big swings in tech. What chart experts are watching
A whirlwind earnings week saw traders jumping in and out of some of the biggest stocks in the market. In the coming days, technical experts will be watching to see whether those moves have staying power. So far, companies with negative earnings surprises are seeing their stocks slide by 2.5% on average, slightly higher than the typical decline of 2.3% for this part of earnings season, according to a note from John Butters at FactSet on Friday. Positive surprises are seeing smaller moves of about 1%, in line with their five-year average. Those macro numbers might seem small to daily market watchers, as some of the bigger post-earnings moves in either direction have affected the market’s most influential stocks. For example, shares of Meta Platforms fell 10.6% on Thursday after earnings beat expectations, but revenue guidance was weak . Meanwhile, Alphabet jumped 10.2% on Friday after reporting an earnings beat and announcing a dividend . On a chart, those big post-earnings moves can leave “gaps” that may become a key area to watch going forward. “What happens with these gaps it’s like they leave almost like a pocket on the chart where there’s no selling pressure. Think of it as almost like a little vacuum,” Katie Stockton, founder and managing partner of Fairlead Strategies and a CNBC contributor, said about some of the downside moves. A similar situation can exist when a stock opens sharply higher after an earnings beat. The gaps themselves take on extra importance if they break through a key resistance level, say, a 50-day moving average, and if they are not quickly “filled” in the next few trading days, she said. “We always make sure that the gaps are sustained, if you will. So let’s say you saw a gap above a resistance level, that’s your breakout. For the next few days, we like to see that stock hold up above the gap because that effectively confirms the breakout,” Stockton said. What’s next for Meta Meta looks like a potential example of the gap being filled after its sharp drop on Thursday. Stockton said the stock did cross some resistance areas and described the move as a “short-term breakdown.” However, shares closed above their lows on Thursday and then ticked up on Friday. For investors who still want to sell Meta, this upward trend is a sign that it might be best to wait, Stockton said. “It suggests, from a short-term perspective, it’s a little overdone. … You probably want to give it a little more room to bounce for a selling opportunity,” Stockton said. Nvidia’s week Nvidia does not report earnings until May. But the stock did on April 19 see a 10% drop that fed into the market volatility. The stock’s price movement since the drop could be an example of what technical analysts and traders will be watching for with other tech stocks that saw post-earnings moves. Nvidia’s stock is still below its highs of the year, but it gained more than 15% last week. That rebound erased the April 19 decline. Frank Gretz, technical analyst at Wellington Shields, pointed out on Friday morning that the chip stock was on the verge of climbing back above its 50-day moving average, which was breached during the April 19 slide. “It’s right up against the 50-day but looks like it might go through, which would be impressive. … A lot of stocks, after they break, they stop right at the 50-day,” Gretz said. The stock did close above its 50-day moving average on Friday, according to FactSet. A macro view The big moves by tech giants this past week could make index-level trades a bit tricky. Larry Benedict, a hedge fund veteran and founder of the Opportunistic Trader, said some of these big moves can effectively cancel each other out. “It’s almost like a one-off market. … You could have Intel down 10%, and have Microsoft up 5%, and the weighting in Microsoft is just so much greater that it has much more influence on the market,” Benedict said. For all of the single-stock volatility, the S & P 500 ended the five-day period with a gain of 2.7% — its best week since November.
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