Last week, we looked at the potential for big moves from Coinbase and Points International after reporting quarterly earnings.
Both stocks fell on the news, but both have totally opposite signals for traders.
Coinbase fell but is in the midst of a breakout. So the stock’s drop is a buying opportunity based on the chart I showed you last week.
Points International drop caused it to break out to the downside of a wedge pattern. That is telling us to expect an even bigger move to the downside.
In our latest Earnings Edge, I have two more small-cap stocks set to make big moves this week …
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Now let’s dive into today’s Earnings Edge.
Earnings Edge Stock No. 1: Ituran Location and Control Ltd. (Nasdaq: ITRN)
Earnings Announcement Date: Tuesday, before the open.
Expectations: Earnings at $0.43 per share. Revenue at $67 million.
Average Analyst Rating: Outperform.
The Israel-based location services provider and wireless communications products company, Ituran Location, is trading in a nice wedge pattern.
We keep pointing out these patterns in Earnings Edge because they come before big moves in a stock.
And Ituran is in a consolidation pattern right before a big earnings announcement tells us we can expect increased volatility around earnings.
Take a look:
ITRN’s Ups and Downs
Source: Optuma.
The red resistance level and green support make the wedge formation that signals investors are uncertain about the upcoming earnings report. They’ve basically sent ITRN nowhere for months. But that all changes this week.
A make-or-break earnings announcement is coming, and an 8% move is all ITRN needs to have a major breakout.
Options traders are betting on a small move this week, just 1% or so.
This may be a good opportunity for another straddle trade where you buy a call option and put option for the same strike price and expiration. Expect a big move, if not this week, then in the coming months.
Earnings Edge Stock No. 2: Maximus Inc. (NYSE: MMS)
Earnings Announcement Date: Thursday, before the open.
Expectations: Earnings at $0.87 per share. Revenue at $1.08 billion.
Average Analyst Rating: Outperform.
Maximus provides business process services to health and human services around the world. That means it supports programs like Medicaid, the Affordable Care Act, child support programs and more. In short, it’s not going away anytime soon.
Shares have dropped 10% since April but have been moving sideways in a wedge pattern for three months now.
Why?
It’s all about earnings.
The company was trading at this same price level, almost exactly, on August 5, its last earnings report.
Since then, investors have been cautious about MMS and are waiting to see more, for better or worse, with this earnings announcement in a few days.
Investors Wait and See on MMS
Source: Optuma.
These consolidation patterns are common before earnings. It’s what we’ve been pointing out for weeks now. Clear resistance levels in red and support levels in green converging towards each other. It leads to an ultimate breakout.
And earnings tend to provide that initial breakout which signals an even bigger move in the same direction.
This week, MMS is expected to make a big move, at least in my book.
We’ll see what comes out of it this Thursday after its announcement.
Chad Shoop is an options expert for Banyan Hill Publishing. He is the editor of three leading newsletters: Quick Hit Profits, Automatic Profits Alert and Pure Income. His content is frequently published on Investopedia and Seeking Alpha. Check out his YouTube Channel to see his latest market insights.
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