This earnings season is very unique. For the first in around 10 years, we have stocks reporting earnings during a major market correction. There are signs of a major trend change in the overall market trend, which has been in a non-stop bull market since 2009. You are going to see a lot of similar daily charts in the stocks we will discuss here. Many of these companies have had a strong run the past year, but are now pulling back strongly, in conjunction with the overall market conditions. Most of these will be on watch for a short play.
When trading earnings stocks, you should never try to gamble and guess what the earnings report will be beforehand. No one knows whether the report will be good or bad, or how the stock will react once it is released. Buying or shorting a stock right before an earnings report is pure gambling. All of the earnings plays we will talk about you should be trading AFTER the report has come out. Here are 5 great earnings plays to watch for next week:
$UAA
UAA is always a great stock to trade during earnings season. It doesn’t have the biggest range normally, but during earnings a ton of range and volume comes in, making it amazing for day trading that day. There is no significant nearby daily support except for the $16 area. If it reports poor earnings and gaps down below this area, we will likely see a strong selloff. If that happens, this will be on the top of my watchlist for a short.
$TEVA
Very similar looking daily chart to UAA. Like UAA, it has history of making big moves, in both directions, in response to quarterly earnings reports. Last August it had a monster multi-day selloff in response to an awful earnings report, and it dropped from $31 a share to $19 a share in just 3 days. TEVA is a great stock for momentum traders, as it has great liquidity and range to trade off of. On all earnings plays you are looking to trade, you should always check how they have reacted in the past to earnings reports. For a complete checklist for trading earnings plays, checkout this guide here.
$SPOT
Spotify has had a strong run the past several months following its initial public offering in April. It has almost hit a high of $200 a share after IPOing at around $160. However, in October we have seen a major pullback, dumping to the $140’s in the past week. The stock has a huge intraday range. After the last earnings report in July, it moved over 10 points the next day. We will likely see a similar type of move next week as well, but possibly to the downside. It’s all time lows are at $135, and there is no other significant support besides the $140 level. If they have a bad report and gap below these levels, we could see a huge selloff.
$W
Wayfair has been on a monster run this year since the poor earnings report it had in late February. It had a big selloff down to almost $60 a share, and has rallied all the way back to as high as $150 in September. There is very high short interest in this stock, with Citron putting out many high profile reports bashing this stock. However it has continued to squeeze despite the questionable fundamentals. It has pulled back in the past month, and it is approaching a key support area in the $105 area. If it has a bad report and gaps under this level, we would have a great shorting opportunity. This stock has a lot of room to fall.
$BABA
Alibaba has been a very strong stock the past couple years, running from around $85 a share to over $200 in just over a year. However since July, it has had a major pullback. The tariffs imposed against China and the departure of their founder Jack Ma have been partially responsible for the major pullback in the largest publicly traded company in China. This stock ia great momentum stock in general, and becomes even better after earnings reports. The $135 support is a key level. If they put out a weak report and it gaps under, we will likely see the selloff continue in the name.
Free Webinar on Earnings Trading
Want to learn how to consistently profit on earnings plays? We are doing a free live webinar next week on October 29th going over the setups I use for earnings plays. During this 2 day online event, on October 30th, you will also get to watch me trade live to see exactly how I trade these setups.
