Finding Opportunities as Earnings Season Kicks into High Gear


It's that time of the year, Q1 Earnings Season, when thousands of companies reveal their numbers, including the good, the bad and the ugly. We've already seen a bit of everything, but that will pale in comparison to what is about to happen, with companies like IBM, Johnson & Johnson, Lockheed Martin and Netflix scheduled to post their numbers this Tuesday. Then, on Wednesday, we'll hear from Proctor & Gamble and Tesla, just to name a few large-cap companies that will give traders an early glimpse of what is about to come.

Just this past week, we saw that traders were disappointed in earnings from JP Morgan (JPM), Carmax (KMX) and Bed, Bath & Beyond (BBBY), to name a few. On the flip side, traders applauded Delta Airlines (DAL) for posting some strong numbers, with the stock moving higher in spite of the market selloff to end the week.

What makes this earnings season so interesting is the current market environment and the economic backdrop; high volatility with a negative tone along with continuing signs of high inflation. And we've seen the yield on the 10-Year Treasury Note go from 1.68% on March 1 to Thursday's high of 2.83% (its highest level in almost 3.5 years), with traders wondering how the increase in rates might affect future earnings.

Needless to say (though I will say it), traders don't really have a clear idea how the market will respond to individual earnings. Why? Because we might well see and hear a lot of companies beat or even exceed expectations but guide lower, or even withhold any future guidance, with uncertainty looming.

This is why you need to be very careful holding individual stocks into their respective earnings reports -- i.e., this particular quarter might be even trickier than normal. Instead, you should consider waiting for companies to post numbers, gauge the market reaction and then make an assessment; was the reaction positive or negative and is there a post-earnings opportunity to take a long or short position?

Trust me when I say this is a VERY tricky process, starting with identifying which companies are reporting earnings, to assessing the initial market reaction, to zeroing in on key price and technical support levels to making trading decisions on those stocks that "make the cut", including identifying key entry and stop levels.

In order to help members of the StockCharts and EarningsBeats communities navigate this complicated process, our Chief Market Strategist Tom Bowley will be conducting a FREE webinar this Monday, April 18 at 4:30 PM eastern, "Q1 Earnings, Sneak Preview". During this timely event, Tom will take a look ahead to upcoming earnings reports to identify companies that could post blowout numbers, as well as those that might come up short, while discussing strategies to profit on both the long and short side. You can learn more about this event, as well as other key webinars scheduled over the next two weeks, by clicking here.

Every earnings season brings with it both challenges and opportunities. You might find this particular quarter to be even more daunting than usual, so just make sure you are prepared for what is about to come.

At your service,

John Hopkins

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