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Post-earnings trade setups: Ashtead and Halfords​

With another week of earnings drawing to a close, Ashtead and Halfords provide us with potential trading opportunities.

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 and trading statements will drive a shift or enhancement of market sentiment. While many see earnings as a significant risk when holding a stock, placing trades in the wake of such events allows for greater confidence that all market knowledge has been factored into current prices.

Ashtead Group

Ashtead has been a consistent performer over the past year, and this week’s earnings highlight the fact that the firm continues to improve. Another rise to their dividend marks the company’s 16th consecutive year of increased payouts. Nonetheless, the impressive 23% rise in quarterly revenues has only provided a brief boost to a stock which has recently slipped back into a confluence of £49.83 support and the ascending trendline. With that in mind, this crossroads will play a key role in determining sentiment going forward. There was little in the earnings report to believe we will see a significant reversal, and thus there is a good chance we will see the stock move higher from here. However, a break back below £49.83 would raise questions over a potential protracted move lower.

Halfords

Halfords shares have slipped back despite an initial post-earnings rally that took the shares through the crucial £4.03 resistance level. That positive sentiment came off the back of a reintroduction of their dividend, yet guidance did provide a warning that stock shortages could hinder sales going forward. Nonetheless, the break through the key £4.03 resistance level did provide a fresh buy signal for this stock. With that in mind, the weakness we are seeing today brings a fresh retracement that looks to represent a buying opportunity for the stock. A break back below £3.70 would weaken that bullish outlook.

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