The Week Ahead in Stocks – Apr 30

Ever since the early February drop, stocks have travelled a disparate but generally sideways path. Both Netflix and Amazon made new highs after their earnings, Apple has remained weak, while Google and Facebook are mid range.

As earnings season hits a peak this week, the general scorecard so far shows a healthy number of beats.

But what really impresses is some of the numbers behind the beats. Facebook reported revenue growth of 49% Y/Y. And on April 26th, a raft of big tech names all surprised, with Amazon posting some mind boggling numbers.

Then you have Netflix smashing subscriber estimates. The company reported 1.96M domestic streaming additions vs. 1.48M consensus, and international streaming additions rose to 5.46M during the quarter vs. 4.98M consensus.

So it’s all looking bullish. Well, all apart from the price action…

Netflix gave all its earnings move back (and more), while Amazon faded nearly 5% from its after hours peak. Google tanked nearly 10% from its post earnings peak, despite a decent report. The markets are clearly nervous about something, and strength is being sold. So what is this “something?” Trade wars, yields, or is it just a question of positioning? The reason itself is perhaps not that important; what we need to see is for strength to hold and for a change in character. Apple’s report on Tuesday could be a big tell, although we expect the choppy price action to continue in line with several historical guides we are tracking.

To conclude, earnings may impress, but the reaction to earnings is what really matters to traders. This is what we will be focused on next week as this choppy and frustrating price action either continues or a new trend ignites.

Good luck and good trading.

Andrew McElroy
Chief Stocks Analyst

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