Our Head of North American Research, Gary Christie gives us a look at some potential earnings movers for the week of Aug 12th.
Looking at the S&P 500 (SPX) there doesn't appear to be a major intermediate-term bottom in place just yet. Prices remain bearish below key resistance at 2950. The uptrend from the start of 2019 has been broken and the index remain below its 50-day moving average, a bearish signal. An ABC corrective wave pattern may be taking place as it did back in May potentially sending prices lower to test March and June lows at the 2720 level.
On a longer term weekly chart, the S&P 500 failed to confirm the breakout of a long term broadening wedge continuation pattern. As long as prices remain below record highs we anticipate a consolidation between 3029 and 2610 with the possibility of a strong sell off towards 2400.
Volatility in the SPX has contracted. The VIX is now bearish below the bearish gap level at 19.85. Overall volatility remains elevated for the month, caution is advised while markets remain bearish.
Here are some stocks on our radar this week ahead of earnings.
On Tuesday, Home Depot (HD) is likely to unveil 2Q adj. EPS of $3.09 vs. $3.05 last year on revenues of $31B up from $30.5B a year earlier. From a chartist point of view, the RSI is below 50. The MACD is below its signal line and negative. The configuration is negative. Moreover, the stock is below its 20 day MA (212.44) but above its 50 day MA (209.22). Home Depot is currently trading near its 52 week high reached at 219.3 on 15/07/19. We expect further downside towards $193.5 with a stop loss at $216.7.
On Wednesday, Lowe's (LOW) is awaited to post 2Q adj. EPS of $2.03 vs. $2.07 last year on revenues of $21B compared with $20.9B in the priory year. Separately, the Co was reinstated at Goldman Sachs with a Buy rating. From a technical point of view, the RSI is below 50. The MACD is negative and below its signal line. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (respectively at 101.97 and 100.68). We expect further decline towards $92.4. An ideal stop loss is set at $103.4.
Also on Wednesday, Nordstrom (JWN) is expected to announce 2Q adj. EPS of $0.78 vs. $0.95 last year on revenues of $3.9B down from $4.1B the previous year. In other news, the Co had its price target cut to $32 from $40 at Bank of America. Looking at a short-term chart, the RSI is trading below 30. This could mean that either the stock is in a lasting downtrend or just oversold and that therefore a rebound could shape (look for bullish divergence in this case). The MACD is negative and below its signal line. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (respectively at 29.7 and 30.94). Finally, Nordstrom has penetrated its lower daily Bollinger band (26.27). Nordstrom is currently trading near its 52 week low at 25.15 reached on 15/08/19. We expect further downside towards $21.9 with a stop-loss at $27.6.
On Tuesday the 28th, Hewlett Packard Enterprise (HPE) is anticipated to release 3Q adj. EPS of $0.41 vs. $0.44 last year on revenues of $7.3B compared to $7.8B in the prior year. Technically speaking, the RSI is below its neutrality area at 50. The MACD is below its signal line and negative. The configuration is negative. Moreover, the share stands below its 20 and 50 day MA (respectively at 14.03 and 14.42). We anticipate downside towards $11.8. An ideal stop loss is set at $14.2.
Happy Trading
