Don't Ignore This Chart!

Bottomline Is Hoping Gap Support Is The Bottom

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About seven weeks ago, Bottomline Technologies (EPAY) produced excellent quarterly earnings results when its top line edged Wall Street consensus estimates and its bottom line crushed them.  Market participants were expecting 9 cents per share and management delivered a huge beat - to the tune of 18 cents.  That doubling of expected quarterly profit excited traders and EPAY was higher by nearly 17% at its high the next day.  EPAY's average daily volume is currently 400,000 shares, but the day after earnings, volume soared to 3.5 million shares, its highest volume day since 1999.  So the technical question becomes, "can EPAY hold the top of gap support created by that high volume earnings-related day?"  Here's the visual:

I enjoy trading gaps as they help to define risk.  In this case, EPAY resides almost squarely on key gap support.  In addition, its RSI has fallen from overbought territory in early September at 70 to a much more palatable level close to 40.  I'd look for renewed strength from this area.

Happy trading!

Tom

Tom Bowley
About the author: is the Chief Market Strategist at EarningsBeats.com, where he provides stock market education, guidance, and trading strategies using a unique combination of technical, fundamental, and historical analysis. Tom provides EarningsBeats.com members with four portfolios (Model, Aggressive, Income, and Value), all designed to beat the benchmark S&P 500, and a revolving Watch List of hundreds of companies reporting strong quarterly earnings (must beat both revenue and EPS estimates) and exhibiting technical strength as well. These companies comprise EarningsBeats' annotated Strong Earnings ChartList (SECL), from which Tom trades exclusively. Tom writes a Daily Market Report (DMR) for members to include an executive summary, market outlook, sector/industry watch, and trading ideas. Learn More
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