Post earnings trade setups – Goldman Sachs, Netflix and Bovis Homes

After a week where earnings reports and trading statements helped dictate market sentiment, Goldman Sachs, Netflix and Bovis Homes provide us with interesting trading setups for the weeks ahead.

Goldman Sachs Source: Bloomberg

This article looks at some of the big movers off the back of recent earnings announcements to try and find stocks that seem to provide a good trading opportunity.

Typically, earnings announcements will drive a shift in market sentiment, allowing for a long-lasting trend to take hold off the back of the announcement.

However, we also can see earnings figures drive a stock into particular reversal points, once again providing us with an opportunity to fade that initial market move based on technical. As such, the aim is to reflect on the impact of these announcements from a technical perspective rather than a fundamental one. After all, the price is expected to reflect all relevant knowledge currently available.

Goldman Sachs

The biggest movers this week have come from the US banking sector, with Wednesday proving to be an absolute blockbuster for the sector.

This is after Bank of America (BoA) and Goldman Sachs both posted better-than-expected profits amid higher interest rates. Much of the charts for firms in the sector look similar, with weakness throughout 2018 being greeted with a sharp recovery and break through the last swing high. Here we can see the price contending with the 19,956 resistance level. The ability to remain above this level is going to be key for the pair to continue in the current direction.

However, with this size of the recent upside, it makes sense to expect a substantial retracement before long. Given the break through 19,956, the long-term picture looks bullish, with a wider recovery expected to play out. However, for now, the key to where we go from here comes with the reaction to this key resistance level.

Goldman Sachs chart

Goldman Sachs chart

Netflix

Netflix grabbed the headlines earlier in the week, with the company announcing impressive earnings with strong subscriber growth.

However, with the revenue growth slowing over the past three quarters, there is a strong chance that we will see this good news story sour somewhat if this continues. Bear in mind that the company has just announced a 21% rate of revenue growth; heavily off the 40% growth seen in the second quarter (Q2) of 2018. Interestingly, despite the initial upside seen on Thursday, we have seen the company’s share price respect the 76.4% Fibonacci retracement at 36,241.

Given the wider trend of lower highs and 76.4% retracement, there is a strong chance that we are seeing the beginning of a strong move lower. As such, it makes sense to look for further downside to come for Netflix despite its seemingly impressive earnings numbers.

Netflix chart

Netflix chart

Bovis Homes

Bovis has seen a similarly spectacular week, with the firm’s trading statement highlighting the expectation of record profits across the year when their full earnings are released next month.

The housebuilders have been under pressure as Brexit negotiations have reached their head, yet traders are beginning to realise that the sector remains robust despite those fears. With the share price currently testing a crucial confluence of Fibonacci and trendline resistance, the reaction to this area is going to be key to determining whether this downtrend is finally set to end. A break through 1060 would be the ultimate signal that the sell-off is over, and we look set to push back towards the 1242 high of May 2018.

Bovis Homes chart

Bovis Homes chart


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