The next official earnings quarter will start on Jan 16 and likely we will see a lot of volatility in the upcoming earnings season. Why so? As alluded to in a previous analysis I posted, Wall Street has largely overestimated earrings till now. So we may see a lot of surprises to the downside. As such, the market won't fare well.
Here is one TA analysis for MSFT. It appears the TA is preparing for the next leg down for MSFT that may be triggered by the disappointing earnings report in the next few weeks.
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Let's look at Microsoft's chart... |
| Notice the similar head-and-shoulders pattern. In Microsoft's case, the neckline spread is $53 per share (roughly $292-per-share peak at the head minus the neckline at around $239 per share). Using the same math, you would take $53 from the neckline price of $239 to find the downside target. That's roughly $186 per share – or about 16% below its current price. The fall throughout 2022 from outrageous valuations doesn't necessarily mean tech stocks are now "normally priced." The worst part of the storm isn't over for these stocks just yet. The market is in a re-valuation phase right now. And the main issue is that these stocks' prices have dropped... but earnings estimates haven't. If these stocks' prices are the so-called "canary in the coal mine," then earnings will come down next. And that could mean these stocks' prices will drop even further. |
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