This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
This article takes a look 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 can also 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 technicals. 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 the relevant knowledge that is currently available.
HP
HP looks set to close out a second consecutive month of downside, in what has been a remarkably consistent uptrend over the past two and a half years. This monthly chart below highlights the wider creation of lower highs and largely flat lows. This triangle formation is likely to continue for some time, yet with a bearish shift expected at either the 61.8% or 76.4% retracement levels. Thus far, we have seen a move back into the region between the 200-month simple moving average (SMA) and 61.8% Fibonacci retracement.
Typically, the stochastic move into overbought and back down below the 80 mark can provide us with a good selling opportunity. On this occasion we are seeing some consolidation, yet the bearish divergence seen throughout the past 19 months highlights the drifting momentum that has come alongside this rally.