This week, we have two stocks that are in uptrends, but earnings can always be the disruptor.

Aluminum giant Alcoa Corp. (NYSE: AA) and leading rail company CSX Corp. (Nasdaq: CSX) are set to report quarterly numbers. These companies should also give us insight on the state of the economy.

Last week, we looked at Delta Air Lines Inc. (NYSE: DAL) and Wells Fargo & Co. (NYSE: WFC), two giants in consumer-dependent industries.

Delta shares managed to climb 2% on earnings Thursday, even as the broader stock markets closed in the red. That positive momentum didn’t last, and shares fell around 3.5% during trading Friday.

Wells Fargo shares were on the move well before earnings, rising an incredible 17% in the first two weeks of the new year.

Earnings on Friday morning caused the stock to jump 3% higher.

Shares already broke out of the rising trend channel, which set up some bullish momentum for WFC to ride throughout 2022.

As we look at two economic bellwether stocks, Alcoa and CSX, we continue our focus on the economy.

These companies are the backbone of the American economy. And if they go gangbusters, then we know consumer sentiment is still strong.

Let’s take a look at each and see what we can expect this week.

Earnings Edge Stock No. 1: Alcoa Corp. (NYSE: AA)

Earnings Announcement Date: Wednesday, after the close.

Expectations: Earnings at $2.01 per share. Revenue at $3.3 billion.

Average Analyst Rating: Outperform.

The aluminum giant is in a unique position. While it faces headwinds due to rising natural gas prices, it also controls the whole process of aluminum — from mining to production.

This gives Alcoa a ton of flexibility when it comes to pricing.

And when you see inflation on the rise, companies can pass rising cost on to consumers. It’s great for businesses but won’t last forever.

Expect the company to make the most of it while it’s happening.

Investors already love AA. It’s riding a strong uptrend into 2022, benefiting from strong demand in the economy.

AA Charges Higher

AA Alcoa stock chart earnings

The increased expectations for AA make each earnings call a pivotal moment.

You can see the stock is riding along the red resistance level, but is shaded orange on the price chart. That tells me the momentum is weakening based on my Profit Radar. The two next steps would be lagging the market before it looks to improve again.

It wouldn’t take much to establish a break out of this trend channel. And you like to see the stock continue to climb even in the weakening quadrant.

But earnings are volatile by nature.

This chart is extremely bullish for AA in 2022, but it may see occasional pullback.

Don’t wait for it to fall all the way to $50 a share if you are watching the stock. A dip into the $50s is enough to catch my attention.

And if that doesn’t happen on earnings this week, you’re better off chasing it higher than waiting on a dip.

Earnings Edge Stock No. 2: CSX Corp. (Nasdaq: CSX)

Earnings Announcement Date: Thursday, after the close.

Expectations: Earnings at $0.43 per share. Revenue at $3.3 billion.

Average Analyst Rating: Outperform.

Recent economic holdouts — namely, chip shortages, port congestion and trucker issues — play into CSX’s hands nicely.

The company benefits from demand at the ports and limited truckers, which force more companies to use rail instead of other means of transportation.

The only problem is that all that good news looks priced into the stock.

Shares have jumped over 20% in the last three months. Take a look:

CSX Is Riding High

CSX stock chart earnings

Investors were factoring in all that news during this period. The stock consolidated into a rising trend channel, noted by the red and green lines.

The stock is sitting in the middle of it at the moment, so any move on earnings won’t give us a breakout. That’s good and bad news. It doesn’t give us a fresh trend to watch for, but we could expect more of the same.

If there’s a dip to the support, it is a buying opportunity.

And if CSX pops but fails to break out of the resistance, you can position for a short-term pullback.

Overall, CSX should be bullish throughout 2022.

But any over- or underreactions to earnings are always tradeable moments.


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Chad Shoop

Editor, Quick Hit Profits

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