Four Earnings Season Specials
Check out charts of Bank of America, Morgan Stanley, Wells Fargo, and eBay.
Heading into earnings, BAC -- like many of the large-cap financial stocks -- has lagged the market badly. If the stock reacts well to earnings, BAC should have resistance at the underbelly of the broken short-term uptrend line. If the stock rallies, look for resistance at around $18. If the stock reacts poorly to earnings, then BAC may slice through first support at $15.85 and test the $14.12 area.
I would look to buy BAC if it reacts poorly to the earnings report in the morning. The ideal entry points for BAC would be the horizontal line support at $14.12.
Morgan Stanley (MS):
Morgan Stanley has a much more interesting chart than that of BAC. MS broke above its long-term downtrend line and has managed to stay above it since early October. If the stock reacts favorably to earnings, look for resistance at the $33.27 level in the short-term and then $35.74. If MS trades lower, $29.12 represents a convergence of horizontal line support and the intermediate-term uptrend line. Below that level, there's no real support until around $27.50.
The MS chart is one of the best I've seen in the financial sector. The stock can be bought on any pullback to the uptrend line at around $29.12 with a stop loss in place on any close below $28.75.
Wells Fargo (WFC):
Wells Fargo is the least attractive of the three financials featured today. Without any trend lines in place, horizontal lines are all we have to determine support and resistance levels. A positive reaction to earnings will likely bring WFC up to resistance at either $29.39 or $31.38. If the stock trades lower, that will likely lead to a test of support at $25.32. I wouldn't want to be in this stock heading into this report -- there's no edge here from a technical perspective. In this case, I'd rather fade (go the opposite way of) any extreme move in WFC off of this earnings report.
I'd look elsewhere in the financial sector for more appealing technical setups; this stock chart doesn't provide any edge presently.
EBay was looking awfully vulnerable prior to Tuesday's trading. A nice rounding top was forming with lower prices soon to come. Then, suddenly, Tuesday's rally carried eBay with it and gave the stock enough juice to form a bullish engulfing candle. That formation nearly always has short-term bullish implications -- but with earnings due out after the bell, anything's possible. A positive reaction to earnings may take EBAY up to 52-week highs at around $25 -- which would also correspond with a test of the long-term downtrend line resistance (see blue line on chart). A negative reaction to earnings may take eBay down to its rising 200-day moving average currently at $20.68. That move lower, if it happens, may take more than a day, so be patient with entries until the stock works its way down to the MA line.
Like Wells Fargo, EBay doesn't offer a great technical picture. You may want to look elsewhere (like IBM (IBM) on a pullback) for better long plays.
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