Happy humpday Coachmen! As earnings week continues indices are set to be opening slightly in the red following market uncertainty regarding Europe’s access to Russian gas. While Putin has claimed he will honour all gas commitments, he’s also proven to not be a trustworthy voice throughout this conflict.
“All bad precedents begin as justifiable measures.”
― Julius Caesar
After an extended rally following Monday’s trough, which can be partially attributed to Netflix’s beat, bulls are doing their best to continue this momentum as we head further into the week. The S&P jumped 2.76%, the NASDAQ leaped 3.11%, and the DJI climbed up 2.43%. As we continue into a massive reporting week the below shows the major companies who have, or will be reporting today.
Short: Baker Hughes Company (BKR-NASDAQ) | Timeline: 1-2 days
Baker Hughes Company, which provides a portfolio of technologies and services to the energy and industrial value chain worldwide, has reported damaging earnings as revenue missed analyst expectations by 6%, while also decreasing by 2% year-over-year. CEO Lorenzo Simonelli said in a statement that as demand for oil in the next 12-18 months is "deteriorating, as inflation erodes consumer purchasing power and central banks aggressively raise interest rates to combat inflation” (Source), investors should steer clear of this risk-on asset. Taking a look at the chart, BKR traders have played a key reversal pattern - a double-top. This pattern is an extremely bearish reversal pattern that forms after an asset reaches a high two consecutive times, then continues to drop below the support of its trough, causing major selling. Another key indicator that bears have taken the reins on this stock is the MACD forming lower highs through its trend reversal, into a bearish cycle as the indicator will struggle to oscillate back through zero.
Long: American Airlines ($AAL-NASDAQ) Timeline: 3 days
Even after a series of rocky headlines throughout Q2 surrounding pilot strikes and delays, American Airlines is set to beat earnings. Slated to be released tomorrow before the bell, consensus on the street, and from the company itself, is that earnings are going to be extremely strong for Q2. With most betting that American Airlines has been able to beat pre-pandemic revenues for the quarter. Although high oil prices throughout Q2 are likely to cut into the bottom line, a beat on revenue is a solid way to renew consumer confidence in the airline industry. For context, the company is still trading roughly 48% below February 2020 price levels. Especially in a bullish week, led by Netflix’s rise, American Airlines stock has the ability to soar on good news. As a word of warning, if revenues come in below $13.4B, or if EPS is below .8, we’d recommend abandoning the trade. On the technical front, after experiencing a death cross in September of last year, the company has recently broken through the 50-day SMA in a bullish run, signalling a further bucking of the previous 10-month’s trend.
Chart of the Day - Equities vs Cash Allocations