US stock markets moved higher on Friday as positive US earnings numbers overshadowed geopolitical concerns in Russia and the Middle East.
The S&P 500 had experienced its sharpest drop since April on Thursday but higher than expected revenue from Google – now the third largest company in the world by market cap – helped push stock markets to healthy gains.
This week promises to be one of the busiest for traders in terms of earnings releases with many US companies scheduled to report; including Microsoft, McDonald’s, Coca-Cola, Netflix, Caterpillar and Visa. While it is not easy to predict how individual stocks will react to their earnings figures, here are some trade ideas to look out for.
Mean reversion trade ideas:
Crown Crafts Inc ($CRWS)
Crown Crafts Inc is a leader in infant and toddler products and accessories and was founded in 1957.
Crown Crafts Inc is my stock market trading idea of the week since the stock is cheaply valued and in good financial condition with a PE of 12.47, PEG of 0.69 and current ratio of 3.70. Despite this, the stock is down 13% this quarter and now looks oversold with an RSI reading of 29. I can see the stock rebounding this week.
Zix Corporation ($ZIXI)
Zix Corp is a technology company that provides email encryption and email data loss prevention.
The stock is down 33% year to date and is oversold on a short term horizon with an daily RSI reading (14) of 29.48. This makes the stock ready for a short squeeze. The stock is now relatively cheap with a PEG of 0.84 and experienced a 20% increase in insider transactions last week.
Trend following trade ideas:
Lear Corp ($LEA)
Lear Corp is a manufacturer of assemblies for the automotive and aircraft industries since 1917. The company serves every major auto-maker in the world and reported a strong Q2 last week.
Lear has been a favourite for trend followers with its steady, consistent returns and last weeks earnings indicate there could be more good times ahead. Even though the stock has broken out to new 52 week highs, the stock is not expensive, with a PEG of 0.88 and trading at 10 times forward earnings.
Short sellers trade ideas:
Microsoft shares soared to new highs last week as CEO Satya Nadella announced 18,000 job cuts. The tech giant reports earnings on Tuesday but looking at the price chart shows the stock is overbought with an RSI reading of 80.10. Value wise, Microsoft is not cheap either with a PEG of 2.43.
This is not a guaranteed short, but Microsoft results do not beat expectations on Tuesday I expect to see a short term sell off.