Earnings reports from these four prominent tech companies will send important signals about the broader tech sector, and their current volume patterns may shed light on how the market will react to the reports.
The 9% decline in shares of Apple, Inc. (AAPL) over the past four days has gotten the attention of investors even though the tech titan will not report earnings until next week. Several of the large technology stocks are reporting this week, and that may help set the overall tone for the tech sector.
The daily technical patterns, especially the volume patterns, can often give some valuable clues about how earnings will impact a stock's price. For example, the daily on-balance volume (OBV) for Google, Inc. (GOOG) had broken its two-month uptrend and was below its weighted moving average (WMA) on April 5, just four days before the company's earnings release.
On April 12, GOOG closed strong at $651.01, which was not far below the daily Starc+ band at $654.73. However, the daily OBV just rallied back to its declining weighted moving average, which is typical of a failing rally. Even though the earnings were not overly disappointing, GOOG is now down 7.9% from the April 12 close.
A look at the volume patterns for Intel Corp. (INTC), eBay, Inc. (EBAY), Qualcomm, Inc. (QCOM), and EMC Corp. (EMC), all of which report earnings this week, may give some clues about how the upcoming earnings may impact the share prices.
Chart Analysis: Intel Corp. (INTC) made new 12-month highs on Monday, and the daily chart shows a solid uptrend, line a, from last September's low at $19.57.
- INTC consolidated in February and early March, as it held the tight monthly support in the $26.20 area
- The relative performance, or RS analysis, broke its downtrend, line b, in March, signaling the surge in prices
- The RS line has good support now at line c
- Daily OBV has not yet made new highs and is locked in a tight range. It is still well above support at line c
- Weekly OBV (not shown) confirmed the recent highs
- There is initial support now at $27.40-$28 with further support at $26.50
eBay, Inc. (EBAY) peaked at $38.18 in late March and is already down 7% from the highs. The company is scheduled to report earnings on Wednesday, April 18
- The daily chart shows short-term support, line e, at $34.83-$35.05. A break of this support will signal a decline to the converging support, lines f and g, in the $33-$33.30 area
- RS analysis broke its uptrend, line h, on March 30. A drop below last week's lows will signal a new downtrend
- Daily OBV has also broken its uptrend, line i, and shows a pattern of lower lows and lower highs
- Weekly RS and OBV analysis (not shown) both look more positive
- There is initial chart resistance at $36.65-$37
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Qualcomm Inc. (QCOM) is not far below its recent highs at $68.87 and is well above the daily uptrend, line b, which is now in the $60 area. The company is also scheduled to report earnings on Wednesday, April 18.
- QCOM confirmed a major upside breakout in February when it surged through six-year resistance, line a, in the $62 area. This breakout level was retested in early March
- The long-term trading range has potential upside targets in the $92-$95 area
- The RS line is acting stronger than prices, as it made new highs late last week
- The RS line is well above support at line c
- Daily OBV confirmed the recent highs but dropped below its weighted moving average almost two weeks ago. It is still well above longer-term support at line e
- The OBV broke through its downtrend, line d, in early 2012, and the weekly OBV (not shown) still looks strong
EMC Corp. (EMC) broke through the 2011 highs at $28.73 in early March and made a high last month at $30. EMC dropped to a low of $27.93 last week, but is now trying to rebound.
- There is minor resistance now at $29.40 and then at $30
- RS analysis confirmed the breakout when it overcame resistance, line h, in February
- OBV formed a slight negative divergence at the recent highs, line i, and has just turned down from its declining weighted moving average. It is well above its uptrend, line e
- Weekly OBV is still above its weighted moving average and did confirm the recent highs
- Next chart support is in the $27.50 area, line f, with further support at $26.50
- Long-term support is in the $25 area, line g
What It Means: Of these four tech stocks, Intel Corp. (INTC) looks the best basis the daily technical analysis, while EMC Corp. (EMC) looks most vulnerable. Qualcomm Inc. (QCOM) and eBay, Inc. (EBAY) both look ready to correct further, and the upcoming earnings reports may cause current shareholders to sell in advance.
How to Profit: For Qualcomm Inc. (QCOM), go 50% long at $62.36 and 50% long at $61.24 with a stop at $56.88 (risk of approx. 8%).
Portfolio Update: Previous buyers should be long Intel Corp. (INTC) from $23.27 and should now be using a stop at $25.68.
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