So, one of my main trading rules is to not hold a stock through an earning’s release date.
Why?
Way too much unknown. I’ve seen company’s report record earnings and the stock goes up. I’ve also seen the opposite. Basically, anything can happen and moves can be swift and you have the overnight risk of the closed stock market.
Well, as a small test of this I decided to play a small position on Apple stock ($AAPL) through last week’s earnings.
Well, Apple reported a record quarter, earning $111 billion over the three months, up 21% over the prior year quarter
On this record news, the stock has moved lower.
Here is the 6 month daily chart:
You can see that the stock has moved down to near it’s 50 day EMA (exponential moving average) where price support should show itself, if the trend continues.
I held on this position, as it brought me back near breakeven on the trading position.
During the past few days hedge funds were likely selling long positions to raise cash (for the GameStop trade) so this is likely part of the price action.
On a fundamental level, I believe in this company’s future and anticipate some exciting new products in the next 18 months.
Back to technical analysis, which gives us more reliable and objective information.
Here is the 2 year weekly chart
You can see the trend line showing where rising price support should be.
However, you can see that last week’s price action printed a Dark Cloud Cover candlestick pattern. This is a sign to watch the price action early next week closely. Should the price action move lower, and more importantly, close under the $130 level then it is likely that the price will move lower to test the rising 50 day EMA, around $105.
Dialing out our view a little more, here is the 10 year monthly chart
Here I added the white trend line that approximates where prior price resistance would show up until early 2020.
Then, that trend broke and we can expect it to appear as new price support. This shows a level near that $105 level discussed above.
So, what I am going to?
Well, watch the price action on Monday closely. If upward momentum does not appear I’m going to tighten up my stop loss on the position OR sell to raise cash to put more on the $GME and $AMC positions.
Given I expect higher market volatility in the days and weeks ahead I think I’ll be writing more here on stocks as well as cryptocurrencies.
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