Capitalize on 2 Post-Earnings Trends (TER & GILD Analysis)

Capitalize on 2 Post-Earnings Trends (TER & GILD Analysis)

Earnings are a must-watch event each week in the markets.

That’s why I track a couple of them every Monday with my Earnings Edge — to spot the potential breakouts and big moves that follow.

By watching the major trends forming and using earnings as a guide, we can pick up on major trends just as they are beginning.

We saw some nice action on our Earnings Edge stocks from last week.

Johnson & Johnson reported better-than-expected earnings and jumped on the news. But it still wasn’t enough to break out of the ascending triangle pattern on its price chart.

This is one to still keep on your radar.

Texas Instruments did breakout — just to the downside. The chip stock topped analyst expectations on earnings, but the outlook was weak, so investors sent the stock down more than 5%.

That was enough to break the key support we were watching, signaling more weakness is ahead for the stock. Just make sure the stock holds lower this week, and then we’ll know it was a clear breakout to the downside.

This is why we track stocks throughout earnings season — big single-day moves that highlight bigger trends.

I live for these kinds of moves because I’m an options trader. I need stocks to move so I can make money. We talk about why knowing these key trends and spotting short-term opportunities is an options trader’s dream each day in True Options Masters ­— a daily newsletter dedicated to options trading. Click here to sign up for it now. It’s free!

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For our Earnings Edge today, I have two more on my radar — Teradyne Inc. (Nasdaq: TER) and Gilead Sciences Inc. (Nasdaq: GILD).

Let’s dive in…

Earnings Edge Stock No. 1: Teradyne, Inc. (Nasdaq: TER)

Earnings Announcement Date: Tuesday, after the close.

Expectations: Earnings at $1.75 per share. Revenue at $1 billion.

Average Analyst Rating: Outperform

Teradyne is a semiconductor company that makes automatic test equipment. It helps corporations speed up their testing process and get new technologies to the market even faster.

It operates in a red-hot sector of the market that investors just can’t get enough of. That propelled TER to nearly double over the last twelve months. But most of this gain came from September 2020 to January 2021, just a five-month window.

Since peaking earlier this year, the stock is down double-digits, and investors are eyeing this upcoming earnings event as a catalyst to drive the stock even higher.

With a volatile stock in 2021, its price chart has created a classic wedge pattern, where a falling resistance (in red) is converging with a rising support (in green). And earnings could be the make-or-break event.

Look for Bullish TER Breakout

TER Breakout

This wedge pattern, after the strong rally we have seen, is why I added the stock to my “Bank It” list back on June 3 — I was looking for a bullish breakout at some point.

It hasn’t happened yet, but since the pattern still holds, I’m still bullish heading into earnings.

Regardless of which way the stock breaks out, I’m looking for a potential double-digit move on earnings thanks to the volatility it has seen — swings of 10% in a matter of days on basically no news. Earnings are a major event and can easily move TER that much.

Texas Instruments, from last week, was another chipmaker. And even though it beat analyst expectations, it sunk on the news and is now potentially breaking down based on the price chart.

Teradyne has a bit of a different market but could get treated like any other chip stock. That’s why knowing whether or not it beats expectations or misses just isn’t good enough — the market can always have a different reaction.

Earnings Edge Stock No. 2: Gilead Sciences Inc. (Nasdaq: GILD)

Earnings Announcement Date: Thursday, after the close.

Expectations: Earnings at $1.75 per share. Revenue at $6 billion.

Average Analyst Rating: Outperform

GILD is a beautiful example of one of my favorite technical patterns — an ascending triangle.

Before I get to that, let’s look at what Gilead has gone through to get where it is.

They were one of the first companies offering treatment to help fight , and were the first approved treatment by the FDA. However, the stock only rallied during the pandemic — the opposite of the rest of the market. Shares actually peaked in May 2020, while the broader markets found a bottom.

The logic here is that with vaccines rolling out and now being widely adopted, treatment for COVID-19 isn’t in high demand.

That’s sent the stock on a roller coaster ride, losing a third of its value before a 20% rebound.

Now, shares are sitting in a beautiful ascending triangle pattern that would almost be impossible not to breakout on earnings this week.

Look how the strong resistance rides across the top in red, and the rising support in green is at a make-or-break point for the pattern.

GILD’s Triangle Pattern Points to Breakout

GILD Triangle

There’s only a 2% gap between the two lines at the moment, which is pennies of a move after an earnings announcement.

And that’s just what the options market is looking for. Right now, they are only pricing in a 2% move this week.

Of course, that is still a possibility. We get a 2% swing on earnings and GILD slowly breaks out of this lengthy triangle pattern.

Or, we get a jump of 5% or more, which is what I’m looking for to indicate a clear breakout.

Once GILD breaks out, we can use the pattern to have an idea of what to expect. You simply take the height of the pattern, from lows to highs, and get an expected move of $14 per share. With a breakout coming around $69 a share whenever it happens, it means we are looking for a price move of 20% in the coming weeks.

So even if we get a 5% or 10% jump on earnings, it’s just the start of an even bigger move.

That’s the trend you would want to capitalize on in GILD.


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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