Prior to the beginning of the current earnings season, we warned investors that this would be a volatile period preceding the ECB and FED meetings, characterized by companies narrowly beating market expectations or failing to fulfill them. We also stated that this would enforce our thesis about the second stage of the bear market and progression deeper into the recession.
It did not take long before earning season arrived, and companies started to prove our predictions true (Adidas, Alphabet, Mattel, etc.). Unfortunately, we expect this trend to continue in the next earning season; indeed, we believe it will be far worse than the current one.
Yesterday, Microsoft announced its earnings for the third quarter of 2022, in which it reported an 11% increase in revenue and a 6% increase in operating income. Additionally, the company reported a 14% decrease in net income and a 13% decrease in diluted earnings per share. That subsequently led to a drop in the price of MSFT stock by more than 6.5% after hours.
In our opinion, this merely highlights what we have been reiterating for a while. The market is in recession, and the recent bounce off the 2022 lows represents merely another bear market rally predestined to fall later. With that being said, we expect economic conditions to worsen next week with another FED rate hike.
Illustration 1.01
Illustration 1.01 shows the daily chart of Microsoft stock. It can be seen closing at 250.66 USD yesterday; however, after the close and earnings report, it plunged more than 6.5% to 234 USD. This dramatic price action occurred despite Microsoft announcing an increase in revenue and operating expenses compared to the same period a year ago.
Technical analysis - daily time frame
RSI, MACD, and Stochastic are all bullish. DM+ and DM- are also bullish. Overall, the daily time frame is bullish; however, the data does not reflect the drop after earnings. Therefore, we expect the daily time frame to turn bearish today.
Illustration 1.02
Illustration 1.02 displays the daily chart of MSFT stock and simple support/resistance levels.
Technical analysis - weekly time frame
RSI, MACD, and Stochastic are flattening, trying to reverse. DM+ and DM- are bearish. Overall, the weekly time frame remains bearish.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
It did not take long before earning season arrived, and companies started to prove our predictions true (Adidas, Alphabet, Mattel, etc.). Unfortunately, we expect this trend to continue in the next earning season; indeed, we believe it will be far worse than the current one.
Yesterday, Microsoft announced its earnings for the third quarter of 2022, in which it reported an 11% increase in revenue and a 6% increase in operating income. Additionally, the company reported a 14% decrease in net income and a 13% decrease in diluted earnings per share. That subsequently led to a drop in the price of MSFT stock by more than 6.5% after hours.
In our opinion, this merely highlights what we have been reiterating for a while. The market is in recession, and the recent bounce off the 2022 lows represents merely another bear market rally predestined to fall later. With that being said, we expect economic conditions to worsen next week with another FED rate hike.
Illustration 1.01
Technical analysis - daily time frame
RSI, MACD, and Stochastic are all bullish. DM+ and DM- are also bullish. Overall, the daily time frame is bullish; however, the data does not reflect the drop after earnings. Therefore, we expect the daily time frame to turn bearish today.
Illustration 1.02
Technical analysis - weekly time frame
RSI, MACD, and Stochastic are flattening, trying to reverse. DM+ and DM- are bearish. Overall, the weekly time frame remains bearish.
Please feel free to express your ideas and thoughts in the comment section.
DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.
Check us out at www.tradersweekly.com
