Contrasting Earnings Results As Markets ‘Take A Breather’

2021-02-03

A tale of two earnings reports was on full display during Wednesday’s market session.

Big Tech powerhouses GOOGL and AMZN released earnings reports after the market closed Tuesday. Both announced record earnings for the pandemic-influenced fourth quarter of 2020.

GOOGL stock spiked higher on Wednesday with its price gaining two times the expected move on the day. AMZN, which announced CEO Jeff Bezos will step down later this year, climbed through midday before declining into the close. GOOGL finished the session up 7.28% while AMZN dropped 2%.

The contrasting price action following positive financial results provides a prime reminder that earnings reports are a coin flip for traders playing the event and looking to cash in. Even a strong report, like with AMZN, can lead to an unexpected next-day directional move.

Simpler’s traders work the longer term strategy around most earnings, with only the occasional “lotto” trade that extends before and after an earnings report.

Low-maintenance setups that avoid earnings pitfalls may not be exciting plays, but they fall under the overarching plan to maintain capital and limit risk. Not losing, while improving our positions, is still a win.

Expectations are the markets are “catching their breath” following fast moves to the upside to start the week. Even with a “pause” Wednesday, the major indexes pushed higher with only the Nasdaq finishing just short of the positive side.

We’ll follow the market’s lead and keep trading the momentum as it builds again.

We Saw: Records earnings reports with contrasting trading results — 

  • A bit of a “breather” in the indexes
  • Three days of upside momentum in the market
  • GOOGL closing above $2k on the day

We’re Watching: Strength of rally through the week —

  • Will consolidation in indexes break into a higher rally?
  • Status of an almost $2 trillion economic stimulus package
  • Setups in: CMG, NVDA, SPWR, BLNK