The market is shaking up.

While our Earnings Edge stocks held up last week, with Alcoa rising and CSX dropping over 1% to break out of the price channel it was in, other companies stole the spotlight.

Streaming giant Netflix saw its shares plunge 20% overnight after reporting weak subscriber growth in its quarterly call Thursday.

And Peloton, a leading at-home fitness company, announced it is halting production and making severe adjustments.

This is all related to the stay-at-home trades coming to an end.

And I think it’s great news.

It means we are returning to a normal environment, where exercise bikes and streaming TV are not two of the most popular stocks.

As more of the economic bottlenecks get cleared up in 2022, it will open the door for stocks to rally after the recent weakness.

So let’s take a look at two more stocks to add to your radar today as they get set to report earnings later this week.

Earnings Edge Stock No. 1: HCA Healthcare Inc. (NYSE: HCA)

Earnings Announcement Date: Thursday, before the open.

Expectations: Earnings at $4.52 per share. Revenue at $15.4 billion.

Average Analyst Rating: Outperform.

HCA Healthcare, the Nashville-based health care service company, is flirting with long-term support.

This is key because we are seeing companies break below these major supports left and right. It doesn’t always mean we are due for a sharp drop lower, but it sets up for a tougher 2022 than many of us were hoping for.

So all eyes will be on stocks that had strength over the last year to see if they can hold that momentum.

For HCA, this week’s earnings report is critical.

HCA Flirts With a Breakout

HCA Healthcare stock chart earnings

The green support line starts back in March 2020, during the bottom of the pandemic crash, and lasts up to this earnings report.

The red resistance is not nearly as long as the support, but it’s already been tested three times. So it’s a significant level to watch.

Since the key levels are converging, we are almost guaranteed a breakout in one direction or another this week on earnings.

We could easily see a 10% move this week, but the options market is only pricing in a 2.5% swing in either direction.

Times like this are great for an options straddle trade, where you buy the same strike and expiration, but one call option and one put option. Then, as long as the stock moves more than the total premium you paid, just over 5% in this case, you’d be sitting on a gain regardless of if the move is up or down.

You just need the stock to make a big move.

And breakouts are notorious for just that.

Earnings Edge Stock No. 2: T. Rowe Price Group (NYSE: TROW)

Earnings Announcement Date: Thursday, before the open.

Expectations: Earnings at $3.11 per share. Revenue at $1.9 billion.

Average Analyst Rating: Hold.

Investment firm T. Rowe Price is a different story.

This company already gave up any sort of bullish momentum it had. The stock has sunk 25% since November.

Now, it’s at an extreme point in its decline and could be due for a pop. It’s hard to see the stock drop another double-digit move to the downside on earnings this week, but you can’t ignore that possibility.

Here’s how things have looked on its chart.

TROW Is Struggling

TROW stock chart earnings

It’s in a clear downward price channel after the steep drop. You can see there’s no real support you can draw from 2021, and it recently made a new lower low and lower high.

This is the definition of a stock you’d want to avoid.

But here’s the catch.

The February 18, 2022 options, about a month out, are only pricing in a 3.5% move up or down.

Again, this stock could easily move 5% or more on earnings this week.

Over the past month, shares have dropped more than 10%.

So this is another great candidate in a volatile market to play a straddle trade on. It’s how you can profit from volatility without having to worry about the direction of the stock. As long as it makes a big move, you are set to profit.

A little tip on these trades: Don’t hold them to expiration — at least not the whole position.

If you get a big move on earnings that secures a solid overall profit, go ahead and lock it in just in case you get a reversal on the initial move.


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Chad Shoop

Editor, Quick Hit Profits

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