Whereas our main focus at EarningsBeats.com is technical evaluation, we mix that technical method with basic evaluation as nicely. Earnings is what we do. Previous to earnings experiences, we’re scouting for these corporations probably to report better-than-expected earnings and likewise the other – corporations we wish to keep away from heading into earnings. Relative energy holds the important thing in each circumstances. Wall Avenue meets with administration groups till their respective quarter finish. Based mostly on what they see and what they hear, they reposition themselves into shares with robust tales and out of shares which can be more likely to disappoint. Since we do not have the luxurious of sitting down with administration groups, our method should concentrate on “listening to the story” from the charts somewhat than the administration groups – and that is precisely what we do.
Over the previous few quarters, we have developed an “Upcoming Earnings Relative Power ChartList”. On this ChartList, we arrange corporations that (1) can be reporting within the week forward, (2) have market capitalizations over $1 billion, and (3) commerce at the very least 200,000 shares a day over the previous quarter to make sure liquidity. The actually distinctive a part of this ChartList is that each chart is in relative energy kind. For example, final week Unitedhealth Group (UNH) reported its earnings and so they had been implausible. UNH beat consensus estimates on each its prime line (revenues) and backside line (EPS). On certainly one of my Buying and selling Locations LIVE exhibits final week, I had identified the nice, the okay, and the ugly amongst upcoming earnings experiences. UNH was the “good”. Any time a inventory is main its {industry} group greater and its {industry} group is among the strongest vs. the S&P 500, that is an incredible mixture and one during which I anticipate to see nice quarterly outcomes. UNH didn’t disappoint. Let us take a look at UNH on a relative energy foundation because it headed into earnings final week:
The worth chart is a relative value chart of the UNH vs. its peer group – well being care suppliers ($DJUSHP). By typing within the image “UNH:$DJUSHP”, the value chart exhibits us how UNH is buying and selling relative to its friends. I believe it is somewhat apparent that it is in an uptrend. The PPO measures momentum, however since this a relative chart, it is really measuring the relative momentum of UNH vs. its friends. Once more, we’re an exceptionally robust chart.
UNH posted excellent numbers. This is a fast take a look at their numbers vs. Wall Avenue consensus estimates:
- Revenues: $80.15 billion (precise) vs. $78.76 billion (estimate)
- EPS: $5.49 (precise) vs. $5.37 (estimate)
UNH did precisely what I might anticipate – report better-than-expected numbers. The following query is, “how did Wall Avenue react to this nice information?” Initially, it gapped greater, moved to an all-time excessive intraday, then bought off into the shut. UNH skilled the “purchase on rumor, promote on information.” Let me be clear that simply because UNH confirmed nice relative energy and reported glorious outcomes, that doesn’t imply we’ll see an enormous advance. Keep in mind, Wall Avenue was shopping for ON THE WAY UP and PRIOR to the quarterly outcomes. Let the short-term promoting be your good friend and allow you to to enter at a greater value. This requires a little bit of endurance. Take a look at absolutely the chart on UNH:
I like entry on the 20-day EMA check (inexperienced arrow). There’s pretty strong short-term value help within the 510-520 space, so I might anticipate to see patrons in that zone. I see good issues forward for UNH, particularly given UNH’s historic affinity for the month of Might. It is risen yearly over the previous decade, test it out:
On Monday, April 18th, I will function an upcoming earnings report in our FREE EB Digest e-newsletter. It is an industry-leading firm, identical to UNH. However that is not all. For all of our EB Digest subscribers, I will share our Upcoming Earnings Relative Power ChartList the place you may examine the relative energy of each firm reporting subsequent week (that met our standards listed earlier). Our EB Digest is totally free and there’s no bank card required. After which I will host a FREE “Q1 Earnings: Sneak Preview” webinar on Monday, April 18th at 4:30pm ET. I will describe how I take advantage of this ChartList to arrange for and uncover nice trades. If you would like to see the featured chart on Monday and register for Monday’s webinar, merely CLICK HERE and enter your identify and electronic mail tackle! I hope to see you on Monday!
Blissful buying and selling!
Tom
Tom Bowley is the Chief Market Strategist of EarningsBeats.com, an organization offering a analysis and academic platform for each funding professionals and particular person traders. Tom writes a complete Every day Market Report (DMR), offering steerage to EB.com members daily that the inventory market is open. Tom has contributed technical experience right here at StockCharts.com since 2006 and has a basic background in public accounting as nicely, mixing a novel ability set to method the U.S. inventory market.
