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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 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.