Stock market: it’s time to trade Q1 earnings

Stock market: it’s time to trade Q1 earnings

US companies have started reporting their financial results for Q1. There will be a lot of reports in the upcoming days, so the stocks will likely make big moves ahead and after the earnings announcements. You can trade these stocks with FBS (learn more)!

 

Monday, April 15

Citigroup

EPS forecast: $1.8

Revenue forecast: $18.61B

Citigroup will report earnings before the market open. Earlier investors had been rather pessimistic about the revenues in the American banking sector because of the government shutdown and the weaker consumer spending. However, JPMorgan and Wells Fargo surprised the market by releasing strong numbers on Friday. As a result, now there are hopes that Citi will follow suit and also perform better than expected. The fact that the bank cut costs and rebalanced its portfolio may help. On the other hand, Citigroup has the largest international exposure among the US banks, so the global economic growth slowdown may hit it the most.

The stock has managed to recover since the end of December. However, during the last 3 months, it has been consolidating within a broadening formation. The most recent move was to the resistance line of this pattern where the price ran into an obstacle provided by 100-week MA (68.30). It needs to rise above this level in order to get a chance to rise to 69.50 and then potentially to 73 and 75.20. If the price returns below March high at 66.80, it will be vulnerable for a decline to 65.60 (200-day MAO), 63.70 (50-day MA) and 61.30 (100-day MA).

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Tuesday, April 16

Bank of America

EPS forecast: $0.66

Revenue forecast: $23.2B

It’s another key US bank that will release its earnings. Here we witness the same spike of optimism after the results of JPMorgan and Wells Fargo. Notice that Bank of America has beaten earnings estimates in ten consecutive quarters. The bank can benefit from the Federal Reserve’s rate hikes of 2018 and loan and deposit growth.

The stock leaped up to the key resistance in the 30.20/30.50 area. Here’s the line connecting 2018 highs. If the price manages to settle higher, there may be a more substantial growth ahead with targets at 31.90 and 33. A reversal down will bring the price to 28.75 (50-week MA) and 28 (100-week MA).

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IBM

EPS forecast: $2.22

Revenue forecast: $18.52B

Analysts expect earnings to decline by 9.40% and revenue to fall by 2.90%. The situation looks mixed. On the one hand, the company’s suffering from the lower demand for PCs and mainframe products. On the other hand, it’s switching to fast-growing, high-margin businesses like cloud computing, data analytics, and cybersecurity. Much will depend on whether the company manages to convince investors that it makes enough efforts to reshape its business. The fact that that International Business Machines spent $34 billion to buy Red Hat may hurt its financial results.

The stock has retraced 50% of the 2017-2018 decline and ended last week around 100-week MA at 144.30. A break above 145.30 will open the way up to the descending 200-week AM at 149.10. There’s also 61.8% Fibo level at 153.45. Support lies at 139.10 (50-day MA) and 135.30 (200-day MA).

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Netflix

EPS forecast: $0.57

Revenue forecast: $4.5B

The company’s earnings per share are expected to decline by 10.90%. Revenue, on the other hand, may jump by 21.60%. The fact that Netflix increased the price of its streaming service may have hurt the domestic subscriber growth. In addition, more and more big players arrive in the streaming market making Netflix’s life harder.

The stock was hurt on Friday by the news that Disney unveiled a competing streaming platform. It broke below the 50-day MA and the support line from the end of January around 359.00. The levels to watch on the downside now include 333.70 (200-day MA) and 325.50 (100-day MA). Notice that there’s substantial resistance in the 370/380 area formed by the downtrend line from the 2018 highs. These levels will keep the price under pressure. All in all, further downside is more likely than further upside.  

Netflix 12.png

 

Wednesday, April 17

PepsiCo

EPS forecast: $0.92

Revenue forecast: $12.67B

PepsiCo has aimed to accelerate revenue growth by strengthening and expanding its portfolio and packaging. The company adjusted to consumer demand for healthier beverage choices with low salt, low sugar, and more natural ingredients. So far, these moves were taken positively by the market. On the other hand, an increase in operating costs and expenses could hurt the firm’s financial results. Analysts expect earnings to decline by 4.2%, while revenue may show a weak growth of 0.7%.

The stock has been trading in a steep uptrend since the start of 2019 and set the new record high at 123.17 at the end of March. For the last couple of weeks, the price has been consolidating between 123 and 121. The breakout of this range will determine the future direction: up, to 125 and 128, or down, to 117.50 (50-day MA) and 115 (100-day MA). The fact that the price went far away from the moving averages increases the odds of correction.

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