This week, we’ll start to see a steady flow of earnings reports from Wall Street as the second-quarter season gets underway. For reference, the S&P 500 index will see 68, or 13%, of its component companies report their results.
The earnings season always offers opportunities for those watching the charts, which is why today’s three big stock charts will take a look at the technical for Qualcomm, Inc. (NASDAQ:QCOM), Abbott Laboratories (NYSE:ABT) and software heavyweight Microsoft Corporation (NASDAQ:MSFT).
Qualcomm, Inc. (QCOM)
Semiconductor companies have been leading the market higher as the Philadelphia Semiconductor Sector Index is trading more than 20% higher for the year, but the performance has been bifurcated as there has been a clear group of “haves” and “have nots” within the sector.
With its loss of 11% for the year, Qualcomm has been in the latter group, but their recent technical turns have put it on the radar of trading bulls. QCOM reports later this week and the report may be the catalyst to juice the stock as it transitions to a bullish outlook.
- After a test and consolidation at $55, Qualcomm shares are now making a bullish cross above their 50- and 100-day moving averages. Both of these trendlines are already ascending, which is bullish.
- QCOM shares officially moved into a long-term bull market trend earlier this year as they move above their 20-month moving average. This trendline should provide support if this week’s earnings report were to underestimate expectations. This support is at $56.81.
- Overhead, Qualcomm could face some resistance, or profit-taking, at $59.35 as this is where the stock’s 200-day resides. This will be the next test for the technical traders, but a crow above the 200-day moving average opens QCOM up to considerable upside potential.
Abbott Laboratories (ABT)
Healthcare companies have been playing catch-up in 2017 and Abbott Labs has been leading the way as it trades to new highs with a 30% year-to-date return.
The company will report earnings later this week and a successful report will push ABT stock into new high territory, something that chart watchers should be focusing on.
- Abbott stock is ready to break to new highs with only 70% of the analysts covering it as a buy. This extremely bullish move will bring more upgrades and buying power to the stock.
- ABT shares are poised to make a move above their top Bollinger Band (approximately $49), which will trigger a volatility rally as the stock is moving to new highs.
- The recent consolidation has brought Abbott out of its overbought status, which means that the stock now has room to move higher from the perspective of “technical valuation.” We often see these situations result in very bullish post-earnings moves.
Microsoft Corporation (MSFT)
Microsoft’s shift to focus on their software platforms, subscription models and cloud computing have helped the company take a leadership role in the technology sector. MSFT is trading almost 20% higher for the year, in-line with the Nasdaq 100 Index.
Microsoft is following a very familiar pre-earnings pattern that caught our eye and is worth pointing out.
- Over the last week, MSFT shares have rallied 7%, putting them back near their highs. This is something that we’ve seen the last two quarters as the traders appear to be “buying the news” ahead of earnings.
- The rally is taking Microsoft shares into technically overbought territory, an indication that the stock is expanding too far ahead of the report. This often triggers profit-taking after an earnings report.
- MSFT shares remain a buy according to our model, but the stock appears ready to see a “Rally and Recoil” reaction to the earnings report, if it is positive. Any negative report will see the stock make a dramatic pullback. Either way that you cut it, Microsoft is a stock worth selling at its highs ahead of earnings with the strategy of buying them back after the report at lower prices.
As of this writing, Johnson Research Group did not hold a position in any of the aforementioned securities.
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