Our Head of North American Research, Gary Christie gives us a look at some potential earnings movers for the week of June 24th.
The S&P 500 surpassed our first target as the index broke to record highs gaining 2.2% last week. Prices are at the upper bollinger band which could test as resistance. As long as 2895 remains support, we now see further upside towards 2976 and 3020 in extension to test the 61.8 Fib extension of the swing low at 2730 and swing high of 2910 on June 11th. The RSI continues to show strong upside momentum.
On a longer term weekly chart, the S&P 500 remains neutral inside a broadening wedge continuation pattern. A weekly close above record highs at 2954 would be a signal of a resumption of the prior up-trend that began back in 2016.
The VIX, a measure of market volatility and fear, turned bearish below key resistance set at 16.6. We anticipate a decline towards 12.75.
Looking at the sectors, the best performing sectors relative to the S&P 500 are Consumer Services, Real Estate and Software. The Energy sector is in the middle of a rebound off its May lows and no longer underperforming the broad market.
Regarding market sentiment, 68% of the stocks in the S&P 500 are trading above their 200-day moving average, the last time the index hit 72% there was a significant correction in the market back in April.
The S&P 500 has gained 18% year-to-date. A continuation of this trend until year end would be even more surprising. We are cautious on what we add to portfolios as a larger correction is due. Risk management is essential near market tops.
Here are some stocks on our radar this week ahead of earnings.
MU:On Tuesday, Micron Technology is anticipated to release 3Q EPS of $0.80 vs. $3.15 last year with revenues of $4.7B compared to $7.8B in the prior year. The Co was choppy after Evercore shared their "muted" outlook for the semiconductors industry regarding excess inventories which would cut memory-equipment spending this year. Technically speaking the RSI is below 50. The MACD is negative and above its signal line. The configuration is mixed. Moreover, the share stands below its 20 and 50 day MA (respectively at 33.89 and 38.48). We anticipate additional pressure towards $36.7. An ideal stop loss is set at $30.6.
FDX: Also on Tuesday, Fedex is likely to unveil 4Q EPS of $4.90 vs. $5.91 last year on revenues of $17.8B up from $17.3B a year earlier. Separately, the Co reported that it will partner up with Dollar General (DG) to "offer package drop-off and pickup services at Dollar General Stores across the US, starting with 1,500 stores in the late summer". From a chartist point of view, the RSI is below 50. The MACD is above its signal line and negative. The configuration is mixed. Moreover, the share stands above its 20 day MA (160.86) but below its 50 day MA (176.8). We expect further upside towards $179.6 with a stop loss at $156.1.
WBA: On Thursday, Walgreens Boots Alliance is awaited to post 3Q EPS of $1.44 vs. $1.53 last year on revenues of $34.5B compared to $34.3B in the previous year. In other news, the Co is reviewing 200 of its UK based stores as part of a company restructuring plan. From a technical point of view, the RSI is above 50. The MACD is negative and above its signal line. The MACD must break above its zero level to call for further upside. Moreover, the share stands above its 20 day MA (51.76) but below its 50 day MA (52.76). We expect further advance towards $56.9. An ideal stop loss is set at $51.1.
NKE: Also on Thursday, Nike is expected to announce 4Q EPS of $0.66 vs. $0.69 last year on revenues of $10.2B up from $9.8B the previous year. In other news, an analyst from Societe Generale argued that Adidas will be better able to weather tariffs on goods imported from China. Looking at a short-term chart, the RSI is above its neutrality area at 50. The MACD is positive and above its signal line. The configuration is positive. Moreover, the stock is trading above its 20 day MA (81.9) but under its 50 day MA (84.09). We expect further downside towards $77.2 with a stop-loss at $86.5.
Happy Trading.
