Every three months the markets begin a new earnings season. This always injects new life into the markets, and stocks will often gap up or down as investors grapple with interpreting the new numbers and revised outlook. A theme also tends to develop as investors price in a certain scenario in advance of the reports. This quarter has seen a propensity for stocks to gap a large amount and then get faded the rest of the day. This action has occurred on at least four market-leading stocks, and interestingly enough with both gaps higher and lower. The end result is they ended near where they were the day before earnings and are painting a mixed picture for the health of the markets.

IN PICTURES: 7 Tools Of The Trade

Amazon.com (Nasdaq:AMZN), for instance, had a sharp gap down following its earnings report a few days ago and promptly headed higher the entire day. The gap down should not have come as a surprise, as AMZN had been steadily setting lower lows and lower highs for several weeks. The gap down reversal does present some challenges for traders attempting to interpret the action. On the one hand, AMZN has yet to make any progress after the gap reversal and remains under its 50-day moving average. On the other hand, the gap reversal showed strong buying and should act as support moving forward. Traders are probably best served watching to see if AMZN will attempt to drop back beneath the gap low near $105 or if it can show some sustained strength and set a higher high above $125.

Source: StockCharts.com

Goldman Sachs Group (NYSE:GS) is another stock that has been weak for the past few months, but it did start to show some life heading into earnings. GS gapped lower much like AMZN, and then promptly headed higher. While GS hasn't made much progress following its report, the company has begun to consolidate in a small bull pennant. GS has also cleared a small base and could have bottomed. The earnings gap low will be a key level to watch moving forward on the downside, while $150 will be a key level on the upside in the near term.

Source: StockCharts.com

Apple's(Nasdaq:AAPL) earnings report is one of the highest profile events each season and this time, the company didn't disappoint. AAPL gapped higher despite showing some weakness in its chart heading into the report. However, AAPL did the reverse of AMZN and GS by gapping higher and promptly heading lower the entire day. In the end, AAPL ended up closing very close to where it did the day before, which also happened to be a pretty wild day. Despite the wild swings, AAPL remains in a consolidation between $240 and $275.

Source: StockCharts.com

Intel (Nasdaq: INTC) is another stock that ended up giving up its earnings-related gap. INTC gapped higher following its report and ended up closing near the lows for the day. It has yet to climb back above the earnings day high, but overall the chart has some positive traits. INTC broke free of the channel it was following as it headed lower from May through July and has been consolidating above its 50-day moving average. It also has yet to fill another gap that wasn't related to earnings, which shows that buyers are willing to continue buying at higher prices. INTC has also set a higher high, which represents yet another bullish development.

Source: StockCharts.com

While it's interesting that all of these stocks reversed their earnings gap, the more important observation is how none of these stocks has managed to follow through one way or the other after earnings. This is showing some indecision and ultimately the peaks of these earnings days need to be watched moving forward. These are important inflection points and a move above or below these levels would have important implications for these stocks. It seems like the markets are close to making an important move and the direction these stocks take could provide an early signal for astute traders.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Chart Advisor

    Uptrending Stocks Dwindle, a Few Remain (EW, WEC, WR)

    The number of uptrending stocks is shrinking, but here a few that remain in uptrends.
  2. Chart Advisor

    Trade Setups Based on Descending Trend Channels (LBTYK, RRC)

    These descending trend channels have provided reliable sell signals in the past, and are giving the signal again.
  3. Chart Advisor

    How Are You Trading The Breakdown In Growth Stocks? (VOOG, IWF)

    Based on the charts of these two ETFs, bearish traders will start turning their attention to growth stocks.
  4. Chart Advisor

    Breakout Opportunity Stocks: CPA, GNRC, WWE

    After a period of contracting volatility, watch for breakouts and bigger moves to come in these stocks.
  5. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  6. Chart Advisor

    Stocks With More Upside Due to Bear Traps (TAP, SPY)

    A bear trap is a pattern that typically leads to at least a short-term rise in prices. Here are stocks exhibiting the pattern.
  7. Active Trading Fundamentals

    New Traders: Trade the Market in 5 Steps

    New traders shouldn’t throw money at securities without knowing why prices move. Follow these five steps to tilt the odds in your favor.
  8. Chart Advisor

    Watch For a Bounce in These Emerging Markets (BRF, PEK)

    While downtrends are clearly in control of the direction of many emerging market ETFs, short-term indicators suggest a bounce higher could be in the cards.
  9. Investing Basics

    Valuation Models: Apple’s Stock Analysis With CAPM

    The capital asset pricing model, or the CAPM, estimates the expected return of an asset based on the systematic risk of the asset’s return.
  10. Stock Analysis

    Will "FANG" Stocks Outperform in 2016?

    Facebook held the most bullish accumulation-distribution pattern into year’s end, telling investors to focus on this issue in 2016.
RELATED FAQS
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  3. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  4. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
COMPANIES IN THIS ARTICLE
Trading Center