EarningsBeats.com Digest for August 27, 2021
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What Does An Earnings-Related Shooting Star Candle Mean?
When Wall Street opens for trading after an earnings report, I don't concern myself with whether a stock gaps up or down. Either can be bullish or bearish short-term. The first thing I look at is did the company beat revenue and EPS estimates? And second, did it raise guidance? NTAP beat revenue estimates, $1.46 billion vs. $1.43
billion. It also easily surpassed EPS estimates, $1.15 vs. $.95. Then the company guided both its revenue and EPS higher for all of fiscal 2022. As you might expect, NTAP jumped higher at the opening bell, clearing overhead price resistance in the process:
At the opening bell, buyers swamped sellers, triggering the initial gap higher. Any time there's an imbalance in demand vs. supply, market makers provide liquidity by taking short positions. It's why most stocks move opposite the initial gap to "fill the gap". When a stock gaps higher and continues pushing higher, it's a signal of insatiable demand - check out Wednesday's EB Digest stock Palo Alto Networks (PANW). But in NTAP's case,
after early demand pushed the stock higher, sellers gained control by the close and NTAP ended near its low of the day, printing a bearish shooting star candle in the process. There's never any sort of guarantee wtih technical analysis. However, that reversal suggests to me that the more likely path for NTAP will be lower in the very near-term. I've marked 3 support levels. The first is the prior price resistance, which now becomes price support. The second is the
bottom of gap support, while the third is the now-rising 20-day EMA. I'd look for NTAP to move lower from here, finding support at one of these three levels.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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