Earnings Edge: Two Stocks at the Make-or-Break Point (MRVL & MTN Analysis)

Earnings Edge: Two Stocks at the Make-or-Break Point (MRVL & MTN Analysis)

Despite the slowdown as the first-quarter earnings season comes to an end, we will get earnings reports from 44 companies this week. Though only two are in the S&P 500 — Brown-Forman (NYSE: BF.B) and Campbell Soup Co. (NYSE: CPB).

Those won’t be the two we are featuring in Earnings Edge this week.

Instead, we focus on two popular stocks that are in clear trends for us to keep an eye on — Marvell Technology Inc. (Nasdaq: MRVL) and Vail Resorts Inc. (NYSE: MTN).

Both are reporting earnings after the closing bell today to set the tone for the week.

Earnings are always a volatile period for a company, and for these two, it might just be the make-or-break point for their current price channels.

A lot of traders love to gamble on the spectacle of the announcement. I take a completely different approach. We still trade around earnings, but instead of betting on the one-day move, we capitalize on a stock market phenomenon known as an earnings drift.

Click here to learn more about my ultimate trading strategy.

Now let’s dive into today’s Earnings Edge

Earnings Edge Stock No. 1: Marvell Technology Inc.

Earnings Announcement Date: Monday, after the close.

Expectations: Earnings at $0.27 per share. Revenue at $817 million.

Average Analyst Rating: Outperform.

Semiconductor stock Marvell Technology has struggled like the rest of the chipmakers. There’s a massive shortage right now due to supply constraints and the pandemic.

Investors have been cautious with the stock as well, sending it 25% lower from the peak in January.

But a 15% pop heading into the earnings report today makes this a pivotal announcement.

With the stock’s volatility, shares have trended in a pattern that speaks uncertainty, a wedge formation.

MRVL’s Volatility Drives a Wedge Pattern

MRVL wedge

 

Basically, we have sellers push MRVL lower at smaller and smaller peaks. But, on the other side of that, buyers keep pushing MRVL up at higher and higher prices.

This makes a resistance trend line (in red) sloping down, creating a wedge with a rising support line (in green).

As those two continue to converge, a breakout becomes imminent.

With the latest rally in the stock, a breakout is within reach later today.

The options market is pricing in just a 2.2% move this week. Now, I wouldn’t try to trade a dip in the stock. It’s just too limited on the downside. The chip shortage will be resolved at some point, and it will lead to massive demand for chips that help boost sales for Marvell.

Instead, look for bullish opportunities, especially if the stock breaks out above the red resistance line.

Earnings Edge Stock No. 2: Vail Resorts Inc.

Earnings Announcement Date: Monday, after the close.

Expectations: Earnings at $6.56 per share. Revenue at $879.9 million.

Average Analyst Rating: Hold.

Vail Resorts is trying to climb that mountain.

This earnings report covers February, March, and April for them. With its top ski resorts busy through this period, it ends up being Vail’s top-performing quarter.

Then sales drop off over the next six months as it prepares for another ski season in the winter.

It may not have a chip shortage, but with consumers ready to hit the slopes, there’s pent-up demand for getting out and about this winter.

And investors are already betting on this.

MTN has steadily climbed 150% since the March 2020 lows.

It’s created a clear and defined upwards price channel for the stock. Take a look:

MTN Is Steadily Climbing Upward

MTN climbing

While I like the price action for the stock, and you never want to fight the uptrend, something tells me this is a buy the rumor sell the news event.

With the next two quarters not going to help the stock, investors may be a little disappointed with these results.

There’s no doubt sales won’t soar this winter, but that’s months away. There’s room for investors to take profits before they gear up for another run late in the year.

MTN traders are looking at a 2.5% move from now till June 18, just two weeks away.

That’s not a large amount, but this is one I wouldn’t gamble on right now.

I know not to fight the trend, but there is a lot of the demand story being priced into the stock.

I’ll wait until we get a breakout in either direction.


Chad Shoop is a Chartered Market Technician and options expert for Banyan Hill Publishing. He is the editor of three leading newsletters: Quick Hit ProfitsAutomatic Profits Alert and Pure Income. His content is frequently published on Investopedia and Seeking Alpha. Check out his YouTube Channel to see his latest market insights.

Click here to join his free newsletter, Weekly Options Corner.

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