The theme through the start of this earnings season was a lack of movement.
Whether companies crush analyst estimates or fail to live up to expectations, stocks weren’t moving up or down.
But that has started to change.
In last week’s Earnings Edge, I highlighted Facebook Inc. (Nasdaq: FB) and Twitter Inc. (NYSE: TWTR). Both stocks were on the move last week, with Facebook surging on earnings and Twitter crumbling.
We also saw big moves in Qualcomm Inc. (Nasdaq: QCOM), Dish Network Corp. (Nasdaq: DISH) and eBay Inc. (Nasdaq: EBAY), to name a few. Each of these stocks jumped or plunged at least 5% after reporting earnings.
Now that we are getting into the thick of earnings season, I’m expecting more big moves after earnings.
I have two off-the-radar companies to keep an eye on for a big move this week.
Earnings Edge Stock No. 1: Enterprise Products Partners L.P.
Earnings Announcement Date: Today, before the open.
Expectations: Earnings at $0.47 per share. Revenue at $7.07 billion.
Average Analyst Rating: Buy.
Enterprise Products Partners L.P. (NYSE: EPD) is an oil and gas midstream services company. That means it operates pipelines to help transport natural gas, crude oil and more refined products. It’s the middleman between raw commodities producers and the end consumer.
This year, energy stocks have been off to the races. The Energy Select Sector SPDR Fund (NYSE: XLE) is up more than 30%, compared to an 11% gain for the overall S&P 500.
EPD is up about 20%. But that doesn’t tell the whole story.
The stock surged 20% in the first few weeks of January.
After that massive move higher, it’s been a roller coaster ride. Take a look…
EPD’s Bumpy Ride Higher
With the peak in January acting as a strong resistance point, Enterprise Products Partners’ stock has formed a classic ascending triangle pattern in 2021.
The rising support line in green shows that buyers are stepping in to scoop up shares at each dip, and they are getting more aggressive.
It’s reached a tipping point just in time for earnings, though, as both lines have narrowed to a tight range.
A breakout is imminent, and earnings are coming up at the perfect time.
The options market is overlooking this technical pattern on its stock. They are only pricing in a minimal 1.2% move.
That’s nothing. Once the breakout occurs, look for the stock to head in that direction in the months ahead.
Stock No. 2: Rambus Inc.
Earnings Announcement Date: Today, after the close.
Expectations: Earnings at $0.28 per share. Revenue at $103 million.
Average Analyst Rating: Outperform.
We have another one set to move, this one after the close today: Rambus Inc. (Nasdaq: RMBS).
The mid-cap semiconductor stock provides chips all around the world.
Tech stocks, based on the SPDR Technology Select Sector Fund (NYSE: XLK), are only up 9% this year — slightly behind the S&P 500.
But you can’t hold these stocks down for long.
And earnings are their best chance to get back on track and head higher from here.
I’m looking for another breakout in Rambus based on its price chart. You can see below how shares are stuck in a wedge pattern…
RMBS Is Coiling Up — Brace for a Big Move
Wedge patterns have a falling resistance line (in red) and a rising support line (in green) converging on each other.
At some point, a breakout occurs, and the stock heads in the breakout direction for the following weeks. Earnings are the popular culprit of these breakouts.
Rambus shares experienced a strong rally from October to February — before we got the latest pullback.
But here’s the thing: Wedge patterns tend to be continuation patterns. That means the breakout usually continues in the same direction as the stock was headed prior to the pattern’s formation.
In this case, shares were clearly rocketing higher.
The wedge is a period of profit-taking and new investors pouring into the stock.
With that coming to an end here soon, you don’t want to bet against the company ahead of their earnings report later today.
Chad Shoop is a Chartered Market Technician and options expert for Banyan Hill Publishing. He is the editor of three leading newsletters: Quick Hit Profits, Automatic Profits Alert and Pure Income. His content is frequently published on Investopedia and Seeking Alpha. Check out his YouTube Channel to see his latest market insights.
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