Post-earnings trade setups: Marks & Spencer, Gap, and Salesforce

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.

Marks & Spencer

M&S shares benefitted from rock-bottom expectations, with the stock jumping despite an 88% decline in full-year profits. Much of that decline came from the clothing and homeware segment, which fell 31.5%. Meanwhile, the food business managed to rise 1.3% despite restrictions. Despite the tough year, we saw the stock hit a 15-month high, only to fall back towards the end of the week. Nonetheless, that rise took us up through a descending trendline dating back to February 2019. As such, that pullback brings us a potential buying opportunity, with any further near-term weakness deemed a chance to enter at a better price. That bullish view holds unless price falls back below the £1.51 swing-low.

Gap

Gap has managed to maintain momentum despite claims that the stock may be overvalued heading into earnings. Nonetheless, with strong e-commerce performance and signs of a resurgence in the main Gap brand, we are seeing the stock push higher once again. The daily chart highlights the rebound from trendline support, with the stochastic on the rise out of oversold conditions.

Salesforce

Salesforce has been on a consistent downtrend over the past nine months, and that remains in play despite a beat on both profits and revenues. The decline seen as we head towards the weekend comes off the back of a rise into the confluence of trendline and 76.4% Fibonacci resistance. With the stochastic looking likely to fall back out of oversold territory, a break below 80 could bring greater confidence of another move lower. After all, the past five occasions have all marked the turning point for the stock. As such, short-term downside looks likely until we see a break out of this channel. A rise up through $237.93 would signal an end to that nine-month downtrend.