The Stock Market Faces A Critical Test The Week of April 23
Michael Kramer and the Clients of Mott Capital own shares of NXPI, V, and SBUX
The week of April 23 will be a big week for earnings, and I already highlighted in my five predictions for earnings the outlooks for AMD, Alphabet, Microsoft, Facebook, and Amazon. But there are plenty of others such as Intel, Qualcomm, PayPal, Visa, Ford, General Motors, Starbucks, Exact Sciences, and the big Oil companies Exxon and Chevron.
Yes, earnings do matter, and more important will be those outlooks for the coming quarters. According to data from Dow Jones S&P Indices, earnings are expected to climb by 40 percent in 2018 to $153,90 from $109.58 in 2017, that is a massive rise in profits, for one-year, and that leaves the S&P 500 trading at 17.35 times 2018 estimates. Earnings are seen climbing another 10 percent in 2019 to $168.64 and that leaves the S&P 500 trading at 15.8 times 2019 estimates. What do you think happens to those estimates should earnings be better than expected? That is right, full-year numbers come up; if they are weaker than predicted those estimates come down. In both cases, we find out stocks are cheaper than or more expensive than we thought. So how big are earnings and the outlooks? Very big.
Semiconductors have been hammered over the past week, and with Intel, Texas Instruments, and Qualcomm reporting we are going to get a perfect sense if Taiwan Semi was a one-off, or if there is more pain in the group to come.
Intel has been trending higher, and the relative strength index looks like a loaded coil, ready to pop. Meanwhile, the trend is overwhelmingly bullish, and that makes me think the stock pops higher.
Qualcomm is near the low-end of the range, and perhaps we get some good news this week on some progress regarding the NXP Semiconductor deal. The NXP deal is a massive deal for Qualcomm and is extremely important to drive future revenue growth for the company.
As a shareholder of NXP, I’d love to get my $127.50 per share, from Qualcomm. But I’m more than okay if they don’t, because I continue to love this company going forward as a standalone, especially when trading 12.5 times next year earnings.
Starbucks has been trending higher, but every quarter has been met with disappointment. It will come down to same-store comps, and growth in China this quarter.
Despite all the headwinds this company has faced, an all-time is within reach.
Although my trading channel may be to narrow, the direction of the trend seems to be one way.
The trend in PayPal is lower at this point, and the RSI is trending that way as well. Support at $73 is extremely important in this case, should PayPal fall.
Visa has been in a channel now for some time, and it appears shares and the RSI have both broken out from a downtrend, with a positive setup in place.
Exxon shares can’t get out of a long-term downtrend, and while support at $72 held, this stock is not going anywhere until it breaks above that downtrend.
Chevron may have room to rise towards $135.
I think the Ford chart is self-explanatory.
That is gonna be it. Good Luck
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