Another week down, another round of market volatility.
And don’t expect it to let up, as earnings season is in full swing.
Our Earnings Edge stocks last week failed to break out, but that doesn’t mean they are not worth watching from here.
Tripadvisor Inc. (Nasdaq: TRIP) stayed in the wedge pattern. You can expect some more consolidation before there’s a tradeable breakout.
Monster Beverage Corp. (Nasdaq: MNST) didn’t do much either. But it will begin to trend in the weeks ahead for you to take action.
Let’s look at two more stocks that are on my short list to trade after earnings this week — Electronic Arts Inc. (Nasdaq: EA) and Tapestry Inc. (NYSE: TPR).
Earnings Edge Stock No. 1: Electronic Arts Inc. (Nasdaq: EA)
Earnings Announcement Date: Tuesday, after the close.
Expectations: Earnings at $1.43 per share. Revenue at $1.77 billion.
Average Analyst Rating: Outperform.
The video game maker that benefits from kids being in front of a screen all the time doesn’t see the kind of results you’d expect.
That’s because the gaming environment has changed over the last couple of years. What was once unheard of is now a profitable business model: free-to-play games.
Electronic Arts thrived for years on the pay-to-play model, where it charged $50 to $75 for a new game, and everyone wanted a copy.
Now kids can play with their friends for free, but video game makers like EA make money when players upgrade their accessories within the game.
That’s a sector of gaming EA hasn’t mastered yet. And its stock is struggling to gain momentum because of it.
EA Can’t Cash In
Shares are trading in a descending triangle pattern at the moment. A breakout is coming, and that will tell you what to expect from the stock in the months ahead.
One of the key things I’ll be watching is a volatile earnings report and a big move in the stock.
The way the market has been going, a 10% move is easy to see this week. Yet the options market is only pricing in a 3.5% move.
There’s potential for big gains, but also an opportunity for a straddle trade — buying the same strike and expiration, but with one call and one put. As long as there’s a 10% move, you’ll make money. Any move greater than that is easy profits.
Earnings Edge Stock No. 2: Tapestry Inc. (NYSE: TPR)
Earnings Announcement Date: Thursday, before the open.
Expectations: Earnings at $0.41 per share. Revenue at $1.42 billion.
Average Analyst Rating: Outperform.
This clothing accessory giant has struggled for years as the consumer market shifts. Tapestry peaked a decade ago on the price chart — and its revenues tell us why.
Since then, it has averaged just a 5% growth rate, and earnings are flat. It’s not seeing strong growth and failing to boost the bottom line. This company is not giving investors much to be excited about.
Heading into earnings this week, the stock recently broke a key support that has now turned into a resistance level to watch.
TPR’s Shift
It’s important ahead of earnings because we could see a rally after the quarterly call that pushes the stock back up toward $36 a share in the coming weeks.
My earnings boost signal for this stock is a strong earnings report and a big jump in the stock. But seeing as I have a cap at $36, I don’t want to chase it too high.
If the stock jumps just 5% or so on an earnings beat, I would look for it to run up to $36 over the next month.
But if earnings are weak, this one is set for more pain to the downside.
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