By Dmitriy Gurkovskiy, Chief Analyst at RoboMarkets
The past week has been rich in third quarter earnings reports. The volatility was not very high, and while many companies were profitable, some large companies were unable to maintain the pace and lowered during the trading session. As a result, equity indices also continued to fall. With positive reports across the board, equities declined as actual earnings declined relative to expectations.
For example, Alphabet's profits (NASDAQ: GOOGL) increased by 3.50% compared to the previous quarter, but the stock still lost 7% when the report arrived, as expectations were higher.
As of April 2016, Alphabet's reports have always exceeded expectations and, once it has not occurred, the market has reacted accordingly.
Another negative development for Alphabet is that the 2018 earnings were below 2017, which has never happened before.
Technically, even Alphabet is weak. The price has already broken down the 200-day SMA, which had acted in the last two years. Now, Alphabet will probably test the $ 1,000 round number, which seems like a good starting point for long trades. Conversely, even if this level is broken down, unpredictable events may occur, with the price falling to $ 800.
While Alphabet went low due to failure to meet expectations, Amazon's earnings hit records, but they still did not help them reach new highs as the price ended the red trading session.
According to the report, Amazon's net income increased by 1.226%. However, it failed to meet expectations.
The selloff was largely tied to the expectations of the next quarter which seemed to be much less optimistic. The fourth quarter is, after all, the Christmas shopping season.
Technically, Amazon's shares are traded around the 200-day SMA, which serves as support. Finally, the price was tested at the beginning of 2016, after which the price rose from $ 500 to $ 2000. Thus, it formed the double top reversal model and has already achieved its downside target. There is support at $ 1,600, and in case the price rebounds, it could reach $ 1,860. With this support, there was the largest volume peak in 2018, which means that the price could continue to rise further.
Unfortunately, the overall perspective shows that the price is unlikely to reach new highs, as there is strong resistance at $ 1,900. If the price rebounds, this can lead to a major fall.
Naturally, one should also mention Tesla's report, after which short sellers suffered losses again. They will probably get used to it, and some of them are already changing their minds.
Tesla has been around for 15 years and it is only the third time that he has managed to finish a quarter in black. According to the third quarter earnings report, the company recorded a net gain of $ 312 million, which was unexpected by most analysts, as the outlook was negative.
Elon R. Musk kept his word in achieving the goal of producing Model 3; this was the main reason why the company could record its net income. Musk now says that Tesla is able to make a net profit every quarter from now on.
In the third quarter Tesla managed to sell 55.4 model 3 cars, earning a profit of 3 billion dollars, which is 3 times higher than last quarter.
The third-quarter earnings report also changed the opinion of the news. Now, Tesla is referred to as "the best electric car manufacturer". Meanwhile, Musk is going to create new factories in China and the EU in order to reduce customs duties and transportation costs. To succeed against Model 3, the competition will have to spend a few years in R & D before reaching the same level more or less.
Traders are very interested in Tesla's news, which can easily be traced back to the charts. The news is very different, and while today the media could say that Tesla is thriving, tomorrow they could publish something like "Musk went high and did another tweet of $ 20 million". With such contradictory news, it's no wonder why the title is traded in such a wide range.
In the last two years, Tesla shares have traded between $ 250 and $ 400, while volumes are much higher when the price approaches $ 250. The 200-day SMA is at the same level and has supported the price in the last 4 years. This time, after the report came out, we can expect the price to burst $ 400 and reach new highs, even with falling US indices.
Any provision contained in this document is based on the particular opinion of the authors. This analysis should not be treated as a trading advice. RoboMarkets can not be held responsible for the results of trading resulting from the negotiation recommendations and reviews contained in this document.