Ominous technical signals seen in these four stocks serve as potential red flags that the companies’ upcoming earnings reports could surprise to the downside.
Even though the majority of reporting companies have beaten analyst estimates, there have been quite a few stocks that have come under heavy selling pressure after their earnings reports were released.
As I discussed in detail on Friday, the stock market still looks vulnerable, and a sharply lower close on Monday would increase the odds of a deeper correction.
Stock index futures are very weak in early trading, so Monday’s close will be quite important. There is a flood of new earnings reports coming this week, and stocks that are acting technically weak are even more vulnerable if earnings disappoint.
As discussed in last week’s Trading Lessons article, there are several technical tools that can be helpful in identifying stocks that may drop sharply in reaction to earnings reports. Here are four stocks that from a technical perspective should be watched closely this week.
Chart Analysis: Netflix Inc. (NFLX) has rebounded over the past week, but the daily chart shows that the flag formation from the January highs, lines a and b, is still intact. NFLX will report earnings after the close on Monday, April 23.
The weekly chart of United States Steel Corporation (X) shows the well-defined downtrend from the 2010 high at $70.95. Since the October lows at $18.85, the stock has been trying to rebound. US Steel will report earnings on Tuesday afternoon (April 24).