We could talk about last week’s slate of storylines for months.
But let’s be honest. Earnings are at the heart of any move in the market.
If stocks sink, it’s because the fundamentals of a company changed.
I think that’s why we saw the reversal last Thursday. Russia attacking Ukraine was shocking. That shook the markets.
But then the market rebounded, which was overdue, and got back to trading on the fundamentals and key levels of each stock.
That brings us right back to earnings playing a critical part in any market movement. With geopolitical conflicts, even more eyes will be on earnings and how those events may impact a company.
That’s why we track a couple companies each week here at Earnings Edge.
And I have two potential breakouts to look at today – ACADIA Pharmaceuticals Inc. (Nasdaq: ACAD) and SI-Bone Inc. (Nasdaq: SIBN).
Let’s dive in…
Earnings Edge Stock No. 1: ACADIA Pharmaceuticals (Nasdaq: ACAD)
Earnings Announcement Date: Monday, after the close.
Expectations: Earnings at a loss of $0.24 per share. Revenue at $135 million.
Average Analyst Rating: Outperform.
ACADIA Pharmaceuticals is a California-based biopharmaceutical company known for its stock volatility. It’s reliant on new drug approvals to continue growing sales.
The company‘s revenue surged in 2017, when its only product, Nuplazid, was released. Since then, revenue has grown, but its pace has slowed from 79% in 2018, 51% in 2019, 30% in 2020 to just 10% this year.
And it has yet to turn a profit.
But, investors are now watching a strong pipeline of pharmaceuticals that the company will likely give updates on during the call on Monday.
You can tell investors are waiting for some big news, because ACAD is consolidating into an ascending triangle pattern.
ACAD’s Tight Trading Range
With the price trading where it was a year ago, despite losing nearly half the value along the way, it shows us that investors are hanging on for some more news.
Because, before this consolidation occurred, ACAD was trading around $50 per share. Then it dropped off a cliff to as low as $16 late last year.
A regulatory setback in a drug it was trying to advance triggered that drop.
These are the kinds of things you have to watch out with any pharmaceutical company. ACAD’s chart shows some of the volatility these stocks can experience.
It may be why the options market is pricing in a 6% move this week from ACAD. Many of the stocks we look at only expect a 2% move. So 6% is a decent amount. The only problem, from a breakout perspective, is that 6% won’t break a key level on the chart above.
It would need to move double-digits to break though one of those resistance lines in red or green.
The good news is it means the options market is likely below expectations here, and we could get a bigger move from the stock than that.
Once the breakout occurs, you can look to play it for a continued move in the same direction in the months ahead.
Stock No. 2: SI-Bone Inc. (Nasdaq: SIBN)
Earnings Announcement Date: Monday, after the close.
Expectations: Earnings at a loss of $0.37 per share. Revenue at $24.8 million.
Average Analyst Rating: Buy.
SI-Bone is also in the healthcare industry. It’s based out of California, but works in a different segment. SIBN develops implantable devices used in surgical treatment. It doesn’t make drugs. It makes medical devices.
But, like Acadia, it is a one-trick show — its iFuse Implant System.
SI-Bone’s innovation is getting the job done though. Sales have grown by about 20% per year, on average. It’s consistent.
So it’s no surprise that the stock is pretty consistent too. Take a look.
SIBN Trends Lower
Right now, shares are chopping around in a wide downward wedge. You can also see that for the bulk of 2021, shares trended sideways before slumping in August and then consolidating in the current pattern.
Guess what set that decline off? Earnings.
But it wasn’t a horrible report. SI-Bone posted record revenue in its last quarterly report. That didn’t trigger the sell-off. But maybe it was something the CEO said on the call, or a weak outlook, or expenses that weren’t expected. Anything can set off a big move on earnings.
That’s why betting on the move before it happens is a gamble.
After that initial drop on August 2, 2021 SIBN fell another 25% before it bottomed a few weeks later. This is why we track earnings. The moves it sets off can be bigger and way more predictable than the initial move.
This week, SI-Bone is in a similar spot. The stock has consolidated and has clear levels to watch.
If earnings move the stock enough to trigger a breakout, you can then look to ride the stock even higher — or lower.
Regards,
Chad Shoop
Editor, Quick Hit Profits
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