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.

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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.

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