4 Sector Stalwarts Enter the Earnings Hot Zone

10/27/2014 10:15 am EST

Focus: STOCKS

Thomas Aspray

, Professional Trader & Analyst

Given that this week is full of earnings reports, MoneyShow’s Tom Aspray studies the weekly charts of four widely watched stocks from four key sectors to determine which one looks the best technically.

The release of the Euro bank stress test results is hitting the Italian and Spanish stocks the hardest as they are down well over 1%. The German and French markets are holding up better but are still lower in early trading as are the US futures.

The crude oil market moved sideways last week but the technical outlook discussed in Friday’s Week Ahead column indicates this market is still vulnerable to a further decline. Of course, the energy sector has been hit very hard as the Sector Select SPDR Energy (XLE) is down 14.4% in the past three months.

This week is a full week of earnings reports with 150 S&P 500 stocks reporting their earnings. So far, 68.1% of the S&P companies that have reported have beat their earnings estimates while 54.6% have beat their revenue estimates.

It has been a tough earnings season for some companies like Neflix, Inc. (NFLX) as they exceeded earnings estimates and met revenue expectations but dropped 20% as they did not add as many subscribers as expected. The stock is now down over 21% from its 52-week high.

In addition to earnings, we have the FOMC meeting, 3rd quarter GDP as well as a host of other economic reports, including the PMI Services Index, Pending Home Sales Durable Goods, the S&P Case-Shiller HPI, and Consumer Confidence.

In looking at those companies that are reporting this week, I picked one widely watched stock from each of the four key sectors; technology, healthcare, the financial sector, and energy.

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Chart Analysis: Twitter, Inc. (TWTR) reports its earnings after the close on Monday and the stock closed a bit higher last week.

  • The quarterly pivot at $47.06 was violated on October 15 but the stock closed the day and week above this pivot level.
  • The weekly uptrend, line a, from the 2014 lows, was also tested.
  • There is short-term resistance now at $52.15 with the daily starc+ band at $54.71.
  • The weekly starc+ band is at $59.46.
  • The relative performance has drifted down to its rising WMA but is well above the support at line b.
  • The weekly on-balance volume (OBV) has turned up from its still rising WMA.
  • The daily OBV (not shown) is back above its WMA.
  • There is first support at last week’s low of $48.80.

Pfizer, Inc. (PFE) was given a boost last week as it announced a 26 cent increase in its dividend. This is the 304th consecutive dividend paid by the company.

  • The stock reports before the opening Tuesday as it gained 4.6% last week.
  • PFE is still slightly below the quarterly pivot at $29.49, which also corresponds to the daily starc+ band.
  • The weekly downtrend, line c, is now at $30.68 with the weekly starc+ band at $31.31.
  • The weekly relative performance is trying to bottom, line e, but needs to move above the resistance at line d, to confirm that it is a market leader.
  • The weekly OBV has turned up from support at line f, but is still well below its declining WMA.
  • The daily OBV (not shown) is well above its WMA and now testing its downtrend.
  • The 20-day EMA is now at $28.74 with further support at $28.30.

NEXT PAGE: Two More Stocks Reporting Earnings to Watch

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Visa, Inc. (V) reports after the close on Wednesday and is 9.35% below its 52-week high of $215.90.

  • The quarterly pivot at $215.47 was tested last week.
  • The weekly downtrend, line a, is now at $217.80 with the quarterly projected pivot resistance at $222.52.
  • The weekly starc+ band is at $224.95.
  • The sharp decline on October 15 took Visa down to $195.19, which was just above the April low of $194.10.
  • The relative performance broke its downtrend, line c, in early September.
  • The RS line is just barely holding above its WMA.
  • The weekly OBV confirmed its bottom formation in the middle of October as the downtrend, line a, was decisively broken.
  • The rising 20-day EMA is now at $209.75 with further support in the $206-$208 area.

Exxon Mobil Corp. (XOM) reports before the open of Friday, October 31 as it has had a rough couple of months. The stock is down over 9% from its August high and is down 4.64% YTD.

  • The weekly chart shows that it triggered a high close doji buy signal last week.
  • The previous week’s low of $86.91 was below the weekly starc- band.
  • The declining 20-week EMA is at $96.60 with the quarterly pivot at $97.24.
  • The weekly starc+ band is at $100.45.
  • The weekly relative performance line peaked out in July (see arrow) as it formed a series of lower lows.
  • The RS line is well below its downtrend and it’s declining WMA.
  • The weekly OBV turned negative the week of September 26 as it dropped below the weekly support at line f.
  • The daily OBV (not shown) is above its WMA, which is trying to bottom out.
  • There is short-term support now in the $91.80-$92.20 area.

What it Means: Of these four stocks, Twitter, Inc. (TWTR) and Visa, Inc. (V) look the best technically as both have positive OBV and relative performance patterns. Still, new positions in TWTR ahead of their earnings have a high degree of risk.

Pfizer, Inc. (PFE) got a boost after raising its dividend but would wait for the weekly RS analysis to complete its bottom formation before buying.

Maybe an earnings disappointment has already been factored into the price of Exxon Mobil Corp. (XOM) as last week’s HCD is an encouraging sign. The OBV pattern suggests just an oversold rally.

How to Profit: No new recommendation.

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