We are headed into the meat of earnings season this week and the tech stocks will get most of the focus. We still believe that it will be very important to keep a close eye on several other groups…especially the industrials. The guidance from those companies will be very important when trying to ascertain just how much of an impact the supply chain crisis and inflation will have on earnings over the next 6-12 months.
However, given that the FAANG stocks plus MSFT make up more than 20% of the S&P 500, it will still be very important to hear/see how these companies “guide”…and thus we thought we’d highlight the charts of the first three companies that report this week. (Facebook, Alphabet, & Microsoft.)
We’ll start with Facebook (FB) since they report after the close this evening…….Actually, the stock is already seeing a move this morning on more news that FB employees have warned for years that it was failing to police abusive content and hate speech. This has taken stock a bit lower, but it is off its overnight lows. More importantly, it still stands slightly above its 200-DMA. This moving average has been KEY support this year. It held that line in January, February, and March. It is now retesting that line, so if it finally breaks below that level in any meaningful way, it’s going to be very bearish for the stock on a technical basis.
That said, if it can bounce off that line again, it should give us a very nice rally. (The bounces off that line that took place in Q1 were followed by rallies of over 15% in matter of just a few weeks.)…….In other words, tonight’s earnings out of FB could/should be followed by very large move between now and Thanksgiving, so action in this stock after they report earnings is going to be vitally important.
GOOGL reports after the close tomorrow (Tuesday). This stock has been the best performing of the FAANG names, but it stands at a key technical juncture as well. The 50-DMA has provided excellent support for the stock all year, but it broke back below that line on Friday. This is not a major problem yet. (It broke slightly below that line in late September…only to regain it rather quickly.) Therefore, if tomorrow’s earnings report/guidance is enough to help it bounce-back once again, it will likely take out its early September highs…and be off and running again.
However, if the earnings report is the catalyst for a further decline, it will be pretty negative. If it takes GOOGL below $2,673, it will take it well below its 50-DMA…take it below its one-year trend-line…and will give it a negative cross on its MACD chart at a much lower-low that the last negative cross (in early September)……So, as you can see, tomorrow’s earnings report will be quite important for GOOGL as well.
Finally, let’s look at MSFT. They also report after the close tomorrow and this stock looks quite good on the charts. It has seen a series of higher-lows and higher-highs all year. Its 100 DMA has provided rock-solid support all year…and it bounced strongly off that line once again at the beginning of the month. It has rallied about 10% since those recent lows…and it has also made yet another nice “higher-high”. With the stock breaking out to another new all-time high just recently, a good earnings report/guidance should help it rise a lot further in the coming weeks.
We do need to point out that MSFT is becoming a bit overbought on a near-term basis on its RSI chart, so it could pull-back at least somewhat if the earnings report is not as good as the Street is looking for. However, it will take a significant break below its 100-DMA for this stock to lose any of the fabulous luster it has gained this year.
Matthew J. Maley
Chief Market Strategist
Miller Tabak + Co., LLC
Founder, The Maley Report
275 Grove St. Suite 2-400
Newton, MA 02466
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