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Ready to trade? (Market Analysis)

With earnings set to take place after normal market trading hours, we're&nbsp;one of the few brokers who facilitate trade in the after-market, specifically on our MT5 platform. There's a useful video at the bottom of this article on how to trade shares with us using MT5. Additionally, for those excited about&nbsp;Tesla, my colleague Chris Weston wrote a fantastic piece <a href="https://pepperstone.com/en-au/market-analysis/tesla-q1-earnings-preview-keeping-dream-alive/" target="_blank">here.</a><h2>Apple:</h2>Apple needs little introduction as a company, with its brand globally recognized and holding the title of the largest company in the world on the basis of market capitalization. The share price has been under pressure from the start of this year as longer-term yields have risen, lowering the value of its interest sensitive cash flows. Additionally, the tailwind from the pandemic which encouraged work, learn and play from home is now receding as societies try to get back to normality. However, Joe Biden’s stimulus checks could be used to purchase Apple products as well as the large consumer savings which could be released as the pent-up demand explodes back into the economy. On Wednesday, Apple gave us an update on its latest product creations. These included a new iPad Pro kitted out with an M1 processor and 5G connectivity amongst other features, AirTags – a small circular tracking device, revamped iMac and a new purple colour for its line of iPhone 12 &amp; 12 mini, etc. The market’s reaction was one of slight disappointment as shares slid 1.28% lower. Apple has big projects in its pipeline such as an ambition to enter the healthcare industry as well as autonomous driving, which are exciting growth areas for the company. The CFO recently reiterated Apple’s commitment of reaching a net cash neutral position over time, which means more returns of capital to shareholders. Apple is well positioned to take advantage of a significant upgrade cycle due to one of the biggest new tech trends – 5G. Besides rising rates, there is a risk of Apple having to cut its App Store commission fees for developers. Hopefully Apple will provide guidance on its outlook for future quarters as investors have been left in the dark due to the uncertainty of the pandemic in previous quarters. Apple has a strong history of beating estimates, currently 8 out of the previous 8 quarters. In terms of the kind of price move we can expect, the average move is 4.1%. As it stands results will be released at 06:00 AEST/21:00 UK Time April 28, just after the US market closes.<img data-image="utgug3glncgj" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt25cc974af7b8d0a9/608149a8b7b88b24a4d28b17/Apple.png" data-sys-asset-uid="blt25cc974af7b8d0a9" alt="Apple.png"/> Apple’s share price has moved slightly upwards/sideways in a ascending channel&nbsp;since September 2020. It looks like Apple could be building it's next leg higher, with a small pullback into the $125 - $130 zone. This area is sticky given the confluence of horizontal support and resistance as well as the 21-day EMA and 50-day SMA.&nbsp;The RSI is also pushing higher and has&nbsp;overcome the 56 resistance, which marked peaks in prior price rallies, there's also plenty room before it can be classified as overbought. A strong Q2 earnings release would help push price higher towards $140.&nbsp;The shorter-term 21-day EMA is also above the 50-day SMA, a signal of bullish intent. Could price get back up to January high levels of $145 or are we set for a move lower towards $120 or worse, below the lower line of the ascending channel - $115?<h2>Amazon:</h2>Amazon another company which I’m sure many of us became intimately familiar with during lockdown as retail shops remained shut. As a result, Amazon produced superb results over last year. The question that some are asking now is, with more people wanting to spend at outdoor shops after being held up in their houses - could this see a slowdown in sales for Amazon. Potentially over the next few quarters yes, but I think e-commerce is definitely here to stay given its convenience for certain products. Biden’s stimulus checks should see some decent spending flowing Amazon’s way. Additionally, there are many regions globally that have low online shopping penetration rates providing green shoots for Amazon’s growth profile going forward. We also saw a change of the guard as Jeff Bezos hands over the reigns to Andy Jassy (former head of Amazon cloud business) and assumes the role of executive chairman by Q3. This could be an indication of more focus being placed on Amazon’s very dominant and high growth cloud business. In an attempt to have more of a physical presence, Amazon has been gradually opening up its own grocery stores (Amazon Fresh) in addition to the Whole Foods chains. Additionally, Amazon have also just made a push into the beauty sector by launching their first high-tech hair salon. A risk to Amazon’s share price is its high growth cash flows being hit by increasing yields as well as looming regulatory risk given their size. In terms of prior beats, Amazon has achieved beats on 6 out of its previous 8 quarters, seeing price bob up and down by an average 3.9%. Results will be released on April 29 at 06:00 AEST/21:00 UK time.<img data-image="oy5x2598huun" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt307b3bf20aeeef65/60814c3a13f73c4f7972f1ee/Amazon.png" data-sys-asset-uid="blt307b3bf20aeeef65" alt="Amazon.png"/> Price action has been sideways/slightly downwards since the 2020 September highs of $3550. Earnings results will have to be strong if price is to break above the downtrend line around $3400. Above that, price would need to take out February’s high around $3430 to make a push towards $3500. The RSI is right up against the 62 resistance which has marked previous peaks in price rallies, so the bulls need to monitor what happens here. The 50-day SMA is just below the 200-day SMA, which means it has made&nbsp;the dreaded death cross – which usually points to price declines. However, given it is such a trivial difference, it may be hasty to draw too much from it.&nbsp;Price should find some support from&nbsp;the shorter term 21-day EMA, as well as the 50-day and 200-day SMA around $3180 area if it makes a move lower to the middle of the channel.&nbsp;<h2>Facebook:</h2>The social media giant Facebook is trying to look at which levers they can pull to keep their growth profile over the longer term robust and not be so overly reliant on ad revenue. Vox, recently reported that Facebook has plans to enter the audio space, creating a product to compete with companies like Clubhouse. However, this may be put on the backburner given, the reopening of the economy and looking at Clubhouse’s latest download numbers. A videoconferencing platform is also on the cards, but again one has to ask is there room for Facebook as we return to more normality and face to face interactions? Facebook also has to try and juggle the multiple headwinds of privacy concerns (new changes in IOS and Android for targeted ads), antirust scrutiny and getting a handle on the rapid spread of fake news. Facebook, has come out of the pandemic relatively unscathed as the doomsday scenario slowdown in advertising spend never came to fruition. They generate almost their entire revenue from this segment so that creates significant concentration risk. Facebook has a number of tools to use in order to diversify its revenues – 1) Larger shift into e-commerce activity taking place on its platform (fee revenue) 2) Leveraging the Tik Tok craze through its own software “Reels” 3) Launch its own cryptocurrency at some stage, which would help stimulate more awareness and growth in Facebook Pay 4) Virtual Reality headset – Oculus 5) Monetizing Whatsapp more aggressively, especially in India with its over 400 mln users a month. Facebook has beaten consensus estimates over the last 8 quarters whilst making an average price move of 4.8%. Results will be released on April 28 at 06:00 AEST/21:00 UK time.<img data-image="reo72y3v0cce" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/bltad5bf2a741edd11b/60814df7ee34c6537c7a2c48/Facebook.PNG" data-sys-asset-uid="bltad5bf2a741edd11b" alt="Facebook.PNG"/>Facebook really is at a key crossroads, sitting right on its 21-day EMA with price candles making long wicks to the bottom, indicating buyers are prepared to step in and send price higher. The $300 level is also a key support level. Additionally, the RSI is right on its 54.69 horizontal support line. Taking all of this into account, the question remains - will Facebook revisit channel highs at $315 or slide lower towards the middle of the channel around the 50-day SMA and $280 zone?&nbsp;<iframe style="width: 500px;height: 281px;" src="//www.youtube.com/embed/72d_P_3mgGI" frameborder="0" allowfullscreen=""></iframe>

Tech_shares.PNG

Will Tech heavyweights shoot the lights out?

Tesla is always a trader favourite and this quarterly earnings report should garner strong interest. Few stocks create such fierce debate as to the near and longer-term prospects, and when you get such dispersion in the expected outcomes you get movement and this creates opportunity. 
Movement is always a draw card for short-term traders and <a href="https://pepperstone.com/global/trading/instruments/share-cfds">Tesla is the poster child</a> of movement and volatility, especially around key announcements such as quarterly delivery or earnings reports.<h3>Core trading considerations</h3>
 
Consider that short interest is 6% of the free float and granted that's come down significantly from the levels we saw in May 2019, it's still elevated and is&nbsp;an important factor for one’s risk management consideration, notably if the guidance and commentary inspires.

If we look at Tesla’s pedigree over prior quarterly earnings (as a guide), we’ve seen the share price fall in five of the past eight quarterly earnings, with the average move lower being 5.7%. In the three time it rallied the average rally was 9.6% - somewhat skewed by the 17.7% gain seen in Q3 2019. So, one thing is true, historically we’ve seen sizeable moves in price to earnings news – this time may be no different, in fact, if the implied move on the day of earnings (derived from options pricing) is 8.7%, so traders are eagerly anticipating movement.




Importantly Tesla is scheduled to report shortly after the cash market close on 26 April, where it’s earnings should dominate the news flow in after-hours trade. We're&nbsp;one of the few brokers who facilitate trade in Tesla in the after-market, specifically on our MT5 platform. Learn&nbsp;more information on <a href="https://pepperstone.com/global/trading/instruments/share-cfds">how to access MT5 for share CFDs</a> or watch <a href="https://www.youtube.com/watch?v=72d_P_3mgGI">our short video</a>.<h3>Technical focus (daily chart)</h3><img data-image="a9m943hwihhm" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blta8a49aafba4fbabe/607f76d80ac0dc4e19b4d97b/21_04_2021_DFX1.png" data-sys-asset-uid="blta8a49aafba4fbabe" alt="21_04_2021_DFX1.png">
(Source: Tradingview) 
The primary bull trend that commenced last March remains intact and we'd need to see a move through $620 in Tesla stock for this to break. Tesla's share price is above both the 20 and 50-day MA, but it's unconvincing and the bulls want to see a break above $780 to see the bull trend resume. At this juncture given the many considerations that could drive the share price and the potential for outsize moves, it's easy to see choppy price action in earnings, with traders reluctant to take on too much exposure before the 26th. 
 <h3>What to watch in the earnings release?</h3>
 
Only recently, Tesla released its Q1 vehicle delivery numbers, which were just shy of 185,000 and some 7% above consensus expectations. The street are looking for signs of a more rampant second half, with consensus expectations calling for 831,000 delivered vehicles for the full-year. The share price likely reacts to any guidance above or&nbsp;below here, with expectations they'll confirm a 50% increase in deliveries (year-over-year).
In terms of Q1 earnings, I'm not sure the reported quarter’s numbers matter too intently as it’s about the concept of the future. That said, if we do see a material beat or&nbsp;miss to expectations then it may promote a quick-fire reaction. Here’s what’s expected:
· Q1 EPS of 77c
· Q1 Revenue of $10.33b
· Will they be on track to meet Q2 expectations of $11.62b?
· Gross margins 21%
· Return on equity of 43%
With a market cap of $685b one suspects strong expected future delivery growth is baked in, with the market clearly seeing them as a global leader in the auto market by 2030. Recent stats show Tesla’s market share in EV sales has dropped from 25% to 24%, with VW picking up the pace quite rapidly, while GM are also a key threat. The board will want to arrest that, especially in the US EV market, where its market share has dropped to 61% from 84% vs the PCP.
Many feel that for the valuation to truly justify current levels, the market needs to see genuine clarity the company is moving closer to a world where autopilot and&nbsp;self-driving will be the norm, and the change led and dominated by Tesla. On recent news flow that is some way off – expect any statement around this to garner trader interest.
Traders will also be keenly interested in developments around the full internalisation of its battery development so that it becomes ever more self-reliant. As will be the case with news on the opening of new factories in Austin, China, and Germany which will help with the potential demand. The unveiling of any new models could also be a catalyst for the share price.



For those interested in looking to <a href="https://pepperstone.com/global/trading-platforms/platforms/metatrader5">trade the opportunity in Tesla, it’s time to download MT5 and put Tesla on the watchlist</a> as the prospect of movement and range expansion is clear.

hong-kong-swish.jpg

Tesla Q1 earnings preview – Keeping the dream alive

<img data-image="gl2ckhzpv90h" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt37ad23483187cdd3/606dcca09043b93f589eef26/Earnings_table.png" data-sys-asset-uid="blt37ad23483187cdd3" alt="Earnings_table.png">
The table above gives a nice overview of key metrics for important US shares. Below we'll take a look at 5 in more detail.<h2>JP Morgan:</h2>
Banks are starting to look really interesting as we emerge from the covid induced economic recession. Given that banks are a levered play on the health of the economy, they have a large tailwind behind them with improving US economic data. An accelerated vaccine rollout and massive stimulus is firing up GDP forecasts and the labour market. Longer term yields have been rising as a result, steepening the yield curve in the process which feeds through into better Net Interest Margins (difference between short and long term interest rates) aiding bank profitability. If we see a substantial release of credit loss reserves (which drop straight to the bottom line) combined with punchy revenues from their trading desk operations as a result of the increased asset price volatility seen in Q1 then the stars could really align for JPM. Forward guidance and the outlook given by JPM will also carry weight given their key insights into the health of the economy through their clients’ borrowing and spending data. In addition, the Federal Reserve recently stated restrictions on buybacks and dividend payments would be lifted after June 30. Lastly, banks form part of the cyclical recovery universe of shares and could see some thematic buying helping to propel the share price higher. What you need to watch when earnings drop is if earnings and revenues come in higher or lower vs consensus estimates, I’m expecting consensus beats when JPM reports their results. JPM has beaten consensus earnings estimates 7 times over the previous 8 quarters with an average price move up or down of 2.1%. Results will be released on Wednesday April 14 at 21:00 AEST/12:00 UK time. 

<img data-image="718eqdagf1tl" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt5650b10944f6b09e/606dce2ecc47527b6517eeb9/JPM.png" data-sys-asset-uid="blt5650b10944f6b09e" alt="JPM.png">
Pink line: 21-day EMA; Light Blue Line: 50-day SMA; Dark Blue Line: 200-day SMA (same for all other charts)
Taking a look at the chart we can see price has been in a nice ascending channel since October last year, with dips into the 21-day EMA being bought. Of late price has been moving sideways in a tight range between $150-155 and is right on the 21-day EMA. This Q1 earnings release could be the catalyst for a breakout from this range. On the downside price has support from the $150 horizontal support, lower line of ascending channel and further below that there is the 50-day SMA around $146. To the upside, the first hurdle to clear is the $155 range resistance with solid earnings bringing the March 18 high into play at $161.69. The RSI is far from overbought territory and just below the 55 resistance level. 
<h2>Netflix:</h2>
A company most of us are very familiar with given it was an important part of our entertainment during lockdown. The streaming giant really needs to bring its A-game as the pandemic draws to an end and consumers begin to get off their couches. User growth (Global net paid subscriber additions) is one of the most important metrics we will receive on April 20, with the company guiding for 6 mln. The market concern is for a potential slowdown in growth due to Covid pulling forward subscribers from future years. Netflix is facing intense competition from the likes of Hulu, HBO Max and Disney+, who will be trying to eat into Netflix’s market share. In terms of recent positives for Netflix: 1) Prices were recently raised in Japan by 13% (a strong growth region) 2) A global prompt message was designed to pop up on users’ screens to try and convert shared accounts into individual paying accounts (potentially boosting new paid subscriber additions) 3) Solid results from a mobile-only strategy rolled out in India, a market with huge potential 4) The expectation of being break-even over 2021 could lead to share buybacks. A negative factor which may hurt global revenues is the strength in the dollar we’ve seen over Q1. Netflix has beaten market earnings expectations 6 of the last 8 quarters. If you’re looking for a big price move, Netflix certainly doesn’t disappoint, with an average move of 6.4% up or down. Results will be released around 06:00 AEST/21:00 UK time (after the US market closes, which you can trade with Pepperstone). <img data-image="e0dxkn7w2z27" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/bltd890a09464bc2e68/606dce6bb75906764b1a4018/Netflix.png" data-sys-asset-uid="bltd890a09464bc2e68" alt="Netflix.png">
 The technicals show that Netflix has been in a range between $470-570 since last year July. It actually looked as if the price candles had formed a triple top pattern over July to October. However, since 2021 price has had a slight tilt to the upside making higher lows, supported by the 200-day SMA and lower line of the ascending channel. The RSI looks like it wants to move higher and is currently above the 53 resistance line, with plenty of room before it becomes overbought. $600 could be well in reach on a strong set of earnings, slightly above the January 20 high of $593.29. A weak set of earnings could see price slide down towards the $500 level – around the 200-day SMA. 

<h2>Apple:</h2>
Apple needs little introduction as a company with its brand globally recognized and holding the title of the largest company in the world on the basis of market capitalization. The share price has been under pressure from the start of this year as longer-term yields have risen, lowering the value of its interest sensitive cash flows. Additionally, the tailwind from the pandemic which encouraged work, learn and play from home is now receding as societies try to get back to normality. However, Joe Biden’s stimulus checks could be used to purchase Apple products as well as the large consumer savings which could be released as the pent-up demand explodes back into the economy. Apple has plans to enter the healthcare industry as well as autonomous driving, which are exciting growth areas for the company. The CFO recently reiterated Apple’s commitment of reaching a net cash neutral position over time, which means more returns of capital to shareholders. Apple is well positioned to take advantage of a significant upgrade cycle due to one of the biggest new tech trends – 5G. Besides rising rates, there is a risk of Apple having to cut its App Store commission fees for developers. Hopefully Apple will provide guidance on its outlook for future quarters as investors have been left in the dark due to the uncertainty of the pandemic in previous quarters. Apple has a strong history of beating earnings estimates, currently 8 out of the previous 8 quarters. In terms of the kind of price move we can expect, the average move is 4.1%. As it stands results will be released at 06:30 AEST/21:30 UK Time just after the US market closes. 
<img data-image="nre37tqp7qn5" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt383ae4a42abb8c3a/606dce8acc47527b6517eebd/Apple.png" data-sys-asset-uid="blt383ae4a42abb8c3a" alt="Apple.png">
 Apple’s share price has moved sideways since the end of February, sticking to a tight range of $120-125. Recently, price has broken through the mini downtrend line and the range. It looks as if Apple wants to have a go at the $130 level just above the 50-day SMA. The RSI is also pushing higher and trying to overcome the 56 resistance. A strong Q2 earnings release would help in this department. The shorter-term 21-day EMA is also curling back upwards, signal of bullish intent. Could price get back up to January high levels of $145 or are we set for a move lower towards $120 or worse $115? 

<h2>Tesla:</h2>
Tesla just last Friday shot up as a reaction to the news that 184.8k vehicles had been delivered, beating market estimates of 168k vehicles comfortably. Going into China looks like a savvy business decision by Musk, with the an entry also into another high growth region, India, likely to come soon. However, if trade tensions begin to pick up again between the US and China, it could create some problems for Tesla’s sales in China. Those delivery numbers are quite commendable I must say, especially as there is a global semi-conductor chip shortage which led to the closure of Tesla’s US factory going offline for 2 weeks. Are we on the precipice of a new green energy revolution sweeping across the globe? It certainly looks that way, with millennials now coming into their prime purchasing power years and climate change concerns being front and centre for them, Tesla will only benefit. Additionally, President Biden’s new climate friendly infrastructure goals alongside more supportive regulation (EV tax credit change etc) works in Tesla’s favour. However, competition is heating up in this space with Volkswagen recently stating they’re making a big push into the EV market. However, given the size of the mobility market, there is enough cool-aid to go round for everyone, but I still believe Tesla will take the Lion’s share given its first mover advantage and cult like following behind Elon Musk or should I call him technoking? Lastly, Tesla also announced a purchase of Bitcoin worth $1.5 billion and the ability for customers to pay for their cars using Bitcoin. Tesla has beaten 5 out of its last 8 quarterly earnings estimates and boasts an average move on the day of 7.2% The Q1 earnings release date is currently being estimated for April 29. 
<img data-image="g8sj3cq3z9c3" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/bltc380918d841efffa/606dce9f1634b47c94ab71b7/Tesla.png" data-sys-asset-uid="bltc380918d841efffa" alt="Tesla.png">
 The technicals indicate a bit of indecision with the upcoming results potentially being the catalyst for price to decide its next direction of choice. Price broke below its 50-day SMA back in late February and saw the shorter term 21-day EMA cross below the 50-day SMA. Price has formed a triangle like pattern with rising lows and falling highs. A breakout in either direction can occur with patterns like this. The RSI looks to be modestly rolling over at the 52 resistance level, which will need to be overcome for the bulls to see further gains. On dips in price I’d watch around the $655 support level and the lower line of the triangle pattern. Above I’d look towards the 50-day SMA as an initial price target around $726 and then the horizontal dotted white line at $800. 
<h2>Amazon:</h2>
Amazon another company which I’m sure many of us became intimately familiar with during lockdown as retail shops remained shut. As a result Amazon produced superb results over last year. The question that some are asking now is, with more people wanting to spend at outdoor shops after being held up in their houses could this see a slowdown in sales for Amazon. Potentially over the next few quarters yes, but I think e-commerce is definitely here to stay given its convenience for certain products. Biden’s stimulus checks should see some decent spending flowing Amazon’s way. Additionally, there are many regions globally that have low online shopping penetration rates providing green shoots for Amazon’s growth profile going forward. We also saw a change of the guard as Jeff Bezos hands over the reigns to Andy Jassy (former head of Amazon cloud business) and assumes the role of executive chairman by Q3. This could be an indication of more focus being placed on Amazon’s very dominant and high growth cloud business. In an attempt to have more of a physical presence, Amazon has been gradually opening up its own grocery stores (Amazon Fresh) in addition to the Whole Foods chains. A risk to Amazon’s share price is its high growth cash flows being hit by increasing yields as well as looming regulatory risk given their size. In terms of prior earnings beats, Amazon has achieved beats on 6 out of its previous 8 quarters, seeing price bob up and down by an average 3.9%. Results are estimated to be released on April 30. 
<img data-image="eso1oh1kc2ls" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/bltd847bdf973a3a4c0/606dcec57b81ef764cc822a3/Amazon.png" data-sys-asset-uid="bltd847bdf973a3a4c0" alt="Amazon.png">
 Price action has been sideways/slightly downwards since the 2020 September highs of $3550. Earnings results will have to be strong if price is to break above the downtrend line around $3350. Above that, price would need to take out February’s high around $3430 to make a push towards $3500. The RSI is right up against the 62 resistance which has marked previous peaks in price rallies, so the bulls need to monitor what happens here. The 50-day SMA is only just above the 200-day SMA, which if it drops below will make the dreaded death cross – which usually points to price declines. Price has recently broken up through the range resistance of $3225 and the shorter term 21-day EMA is curling back up. Price pullbacks should find some support around the $3075 range support and $3050 (uptrend line) areas, with slices through these potentially leading to deeper sell-offs.

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5 exciting shares to trade over US Q1 Earnings Season

One could argue that because equity has failed to show any real concerns around the increase in interest rate expectations – with a full rate hike now priced in for 2022 and four for 2023 – it suggests that equity is still attractive. Then consider that high yield credit has reduced to the tightest spread over US Treasuries since 2007, the VIX index is back to 17% and pre-pandemic volatility levels. Subsequently, lower equity volatility is pulling in further capital into share CFDs.From a somewhat cynical view, because so few are looking at earnings, perhaps therefore we should be looking at the numbers and the outlooks from corporate CEOs’ and CFOs could prove to be a stealth catalyst.Earnings do matter for share CFD prices, certainly over a longer-term period, but this reporting season gives us a chance to mark-to-market whether the consensus estimates for earnings are too low (or high) and if the earnings multiple is due to re-rate further. So, we should consider earnings as a possible catalyst not just for single share CFDs but for the broader index too – while we look at bond markets, perhaps the next leg up in US indices comes from lower volatility and better signs of cash flow, dividends, and earnings.<img data-image="gfvwl7xazmsf" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt952b70a512c6dd68/606bb5249043b93f589ee9f8/percentage-of-companies-reporting.png" data-sys-asset-uid="blt952b70a512c6dd68" alt="percentage-of-companies-reporting.png"/><h2>Q1 earnings expectations</h2>The signs are indeed promising. So far this quarter aggregate Earnings-Per-Share (EPS) estimates have increased by 6% to $39.86. This is the largest quarterly increase since Factset compiled earnings estimates. Its worthy of note, that 61 corporates have issued positive guidance, which is not only the highest number ever, but is 75% higher than the 5-year average. Tech leads the way here with positive guidance, with close to 50% of the upgrades coming in this space.<img data-image="rm4t4o3fmko4" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt82ab4b17ea3f4e37/606bb62db75906764b1a3ac9/quarterly-change-EPS.png" data-sys-asset-uid="blt82ab4b17ea3f4e37" alt="quarterly-change-EPS.png"/>In the lead-up to the 14 April (JP Morgan report), we’ve seen the ratio of companies issuing negative to positive guidance at a 25-year low – so the trend has been that if you have something to announce it has been better skewed towards positive guidance. One could argue this has subsequently shown up in the extent to the earnings re-rating from analysts. On a year-on-year basis, Q1 earnings for the S&amp;P500 are expected to grow over 20% and granted it’s coming off a low base due to the 2020 COVID restrictions, but this is still a solid expansion. At a sector level consumer discretionary, materials and tech is where we should see the growth.<h2>Outlooks are key</h2>We look forward in markets and here we see the consensus calling for close to 50% YoY earnings growth in Q2. For the 2021 full-year EPS estimate the market has revised its call to $173 (representing a 41% YoY gain) and for the 2022 EPS estimate of $199 (a 15% increase from 2021 numbers). So, will the outlooks we hear, and the guidance suggest these numbers are too conservative? Recall, the analyst community typically put out low-ball estimate, so it wouldn’t surprise to see more than 70% of S&amp;P500 companies beating on earnings and 60% on sales.&nbsp;<h2>What will CEO’s say about:</h2><ul><li>The move in interest rates – specifically the financial institutions who will soon start paying out increased dividends again. What will we see from the level of provisions for future non-performing loans? This will be a telling sign on the very entities tasked with lending credit to the real economy.</li><li>The US economy is expected to grow above 7% in 2021, with unemployment due to fall towards 4% - will this change be reflected in the tone of communication especially from cyclical names with high sales receipts in the US?</li><li>Inflation is the buzz word, and some feel we could get an overshoot leading to the Fed having to taper its QE program later this year – what will hear about price pressures and the ability for businesses to either absorb these costs or pass them on to the consumer?</li><li>Commodity prices have had a strong run – any outlook around demand, specifically from China could be important.</li><li>US crude has held a range of $57.50 to $62.50 of late as the perception of demand increases - will we hear of plans from US energy names to increase supply – likely meaning a higher rig count?</li></ul><h2>Trade Q1 earnings with Pepperstone</h2><img data-image="r3bqvrwia5aw" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt14ff3ca5597067f3/606bb8785ddaeb7b647d5118/earnings-season-matrix.png" data-sys-asset-uid="blt14ff3ca5597067f3" alt="earnings-season-matrix.png"/>I expect clients to focus most intently on Q1 21 earnings from Apple, Tesla, Microsoft, Intel, Google (Alphabet) and Facebook. While the range of share CFDs we offer is vaster than in the matrix, I have put together this matrix of names that I feel will get more attention than others. I have looked at a number of earnings variables to understand not just the pedigree around quarterly earnings, but the implied move and short interest. It may help to guide not just risk but trading decisions.Certainly, given the upgrades of late, some of the tech names will be interesting trades through earnings.The ability to capture the opportunity and trade <a href="/trading/instruments/share-cfds/">US share CFDs</a>, real-time and as news breaks is fundamental to our offering. With many of the large- and mega-cap companies reporting in the after-hours market,Pepperstone offers both the pre- and post-market trading sessions. This results in trading opportunities in single share CFD names for 16 hours a day, along with competitive pricing and an extensive range of risk management tools.Clients can already take advantage of our almost unparalleled 24-hour pricing on US indices, and with US earnings in play, the ability to trade single share CFDs from the <a href="/trading-platforms/platforms/">MT5 platform </a>further increases the possibilities. <h2>How to trade US Share&nbsp;CFDs with Pepperstone</h2><div style="padding: 56.25% 0 0 0;position: relative;" class="wistia_responsive_padding"><div style="height: 100%;left: 0;position: absolute;top: 0;width: 100%;" class="wistia_responsive_wrapper"><iframe src="https://fast.wistia.net/embed/iframe/18cfcl6eaz?videoFoam=true" title="Trading tips for US Share CFDs Video" allow="autoplay; fullscreen" allowtransparency="true" frameborder="0" scrolling="no" name="wistia_embed" allowfullscreen="" width="100%" height="100%" class="wistia_embed"></iframe></div></div>

<h3>Why trade US earnings season with us?</h3><ul><li>Trade a <a href="{SCA_BASE_URL}/register?legalEntity=demo&locale=%7BglobalSet:142:wrdsPepperstoneSiteLocale%7D" target="_blank" rel="noreferrer noopener">wide range of forex pairs</a> with us on ultra-tight spreads.</li><li><a href="{SCA_BASE_URL}/register?legalEntity=demo&locale=%7BglobalSet:142:wrdsPepperstoneSiteLocale%7D" target="_blank" rel="noreferrer noopener">Trade the US30, US500 and NAS100 </a>with fast execution speeds.</li><li>Go long or short on US stocks after hours with our <a href="{SCA_BASE_URL}/register?legalEntity=demo&locale=%7BglobalSet:142:wrdsPepperstoneSiteLocale%7D" target="_blank" rel="noreferrer noopener">US Share CFDs</a>. </li></ul>

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US Earnings Season - Q1 2021

Apple’s share CFD price has been on a tear since its March lows as the pandemic led to work, learn and play from home, thereby increasing demand for Apple’s hardware and software products. The question on trader’s minds is - will this week’s earnings (27/1/2021 after market close) be the catalyst to continue the upward trend or will the share CFD price take a breather if earnings disappoint. The street is expecting $1.404 on the EPS front and $102.111 bln in terms of revenue. Some other key metrics are listed below. Hopefully Apple will provide guidance on its outlook for future quarters as investors have been left in the dark due to the uncertainty of the pandemic in previous quarters.<img data-image="71sy2wv8ppcp" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/blt5fa68ddaefb2164d/600d96a3b2ffda0ce54724d3/image_(2).png" data-sys-asset-uid="blt5fa68ddaefb2164d" alt="image_(2).png"/>Source: BloombergLet’s take a quick look at some of the green shoots which should provide a tailwind to the share CFD price going forward. Apple is well positioned to take advantage of a significant upgrade cycle due to one of the biggest new tech trends – 5G. I expect robust sales on the back of the new iPhone 12, with the more premium (higher margin) Pro and Pro max models seeing solid demand too. iPhones should also see some additional buying on the back of pent up demand and the new stimulus checks soon to be deployed in the USA. TrendForce expects the iPhone to account for 35% of 5G smartphone sales in 2021. iPhone sales still make up the bulk of Apple’s revenues around 44%. I will be looking at sales figures in China to see if Apple can continue to eat into Huawei’s smartphone sales. Another interesting development which should help Apple expand their profit margins is the introduction of their own M1 chips (should be cheaper) to power Macs, replacing the Intel chips previously used. The wearables range is also something to keep an eye on – particularly the Apple watch which will continue to benefit from the push into the health and fitness trend. There is much excitement about Apple’s entry into the auto sector via their supposed self-driving electric car to hit the market in 2024. However, some remain skeptical as to whether they will be developing their own Apple car or will instead license their technology to traditional automakers, given that auto manufacturing is traditionally a low-margin capital intensive business. Apple could still benefit from allowing investors to think it’s adding an EV product to its business model allowing for further PE expansion. When comparing the size of the smartphone market and mobility market, Apple would require a far smaller market share CFD of the mobility market to equate to their iPhone sales.Moving onto the software side of the business. Apple is introducing Apple One which will bundle together various services for a much better value price tag. $15 a month, will get Apple One subscribers access to Apple Music, Apple TV+, Apple Arcade, and 50 GB of iCloud storage. Mobile gaming and personal cloud storage are expected to be seriously high growth sectors for Apple. The services side of the business is a great addition for Apple as the subscription style earnings are recurring, predictable and stable offering a resilient, defensive component for Apple. The margins are also much higher than the hardware side of the business. In the face of antitrust scrutiny Apple has had to cut its 30% App Store commission fee to 15% for smaller developers. I don’t see this having a substantial impact on earnings unless it gets applied to the larger developers who make up the bulk of earnings.Apple has a solid history of beating earnings estimates (8 of the previous 8 quarters) and should maintain this trend for this week’s earnings. The average price change is 2.4% on the day of reporting and implied volatility comes in at 4.9% providing traders with enough volatility for trading opportunities.<img data-image="98rw2zkkyw9l" src="https://eu-images.contentstack.com/v3/assets/bltaec35894448c7261/bltd86d80276cf28670/600d97a928e9280c8a0a69fe/Apple.png" data-sys-asset-uid="bltd86d80276cf28670" alt="Apple.png"/>The technical picture shows the white solid&nbsp;uptrend line from the March lows is still in tact. All the moving averages are pointing upwards. The momentum indicators aren't in overbought exhausted territory either. If price was to have a pullback there is a gap in the charts around the $132 level complimented by previous resistance now turned support. Below that you've got the pink 21-day EMA coming in around the $130 level. Price candles have breached the upper band of the Bollinger Bands which could keep large gains in check.&nbsp;

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Earnings Preview: Market darling Apple to continue its ascent higher?

67% of companies have beaten on revenue, some seven percentage points above the five-year average, with those beating doing so by an average of 2.8%.
At an aggregate level, EPS from S&P500 companies has contracted by 16.5%, while sales have declined by 8.8% - but were we expecting anything else given the backdrop by which companies were operating in Q2? In fact, by the time we see the full suite of corporates report earnings, we’re likely to have seen a 42% drop in earnings, and a 10.1% decline in sales, representing the largest decline in earnings since Q4 2008.
One aspect we had identified in our prior earning note (<a href="https://pepperstone.com/en-au/market-analysis/us-earnings-season-q2/">https://pepperstone.com/en-au/market-analysis/us-earnings-season-q2/</a>) was whether corporates would offer increased conviction to the notion that we’re on the cusp of an earnings upgrade cycle – a message being portrayed by the bullish moves in equities (notably cyclical stocks), copper, and crude. The fact expectations for Q3 GDP sit closer to +20% also re-enforces that view that earnings are only going to improve from here.
<img src="https://lh3.googleusercontent.com/QSRzHf9VURwWSuBYfxasARpb97e58rTqmyPvVGgjjh3L8tYmFhKUbtxW8K6YLh8E8k1Y3qwrMIoRqQi6AA47o8qvOpUz1qXeTlJXTtQPMcJk9v7h63174gSUqVveaVi-U3bt4gHz" width="624" height="248" data-image="7m0cblcav5q8">(Source: Bloomberg)
Intel aside, overall, the breadth of companies revising earnings higher has been quite bullish and as such aggregate S&P500 forward EPS assumptions have been lifted modestly. What also appears to be clear, in the early stages of reporting, is that we have seen companies make a genuine effort to lower the Cost of Goods Sold (COGS) and other expenses. The bulls will point to the rising scope for increased operating leverage, predominantly in cyclical stocks likely from next year.
Outlooks have not inspired
However, earnings revision has not been lifted to the extent that offers any real conviction that we’re yet to see the remnants of a v-shaped recovery in earnings that lowers valuations to more palatable levels in the quarter ahead. The lack of forward-guidance from CEO’s and CFO’s, while hardly unsurprising given the economic backdrop, simply results in traders focusing intently on the macro, with sentiment dictated by Fed liquidity dynamics, deteriorating US-China relations, US fiscal negotiations and the economic impact of renewed COVID concerns. Sky-high valuations mean that when we hear news, the bar to a positive move in price is high.
Concentration risk is key for equity index traders
What has also emerged as earnings season has rolled on has been the influence of an ever-greater concentration risk – that being, where a handful of high growth tech names have outperformed by such a margin that they now command incredibly high index weights – this is especially true in the NAS100 where Apple, Amazon and Google represent 30% of the index. The US500 is less pronounced, but we still find just five mega-cap names represent 22% of the US500 by index weight. This is where earnings from these high-flying names really do matter.

Super Thursday could be a volatility event
When you have such incredible concentrated risk, these leadership stocks can really knock the broader market, and even resonate into other asset classes. For example, if we look to Thursday we see Apple, Amazon and Google reporting – if they miss the mark, which seems unlikely given their pedigree, but we could see the NAS100 and US500 futures trade lower, which, could, in turn, push the USD, CHF and JPY higher in appreciation. This would then hit gold and copper. Obviously, the reverse is true if the market likes what they hear, even if valuations are extreme and the bar to a positive surprise is therefore high.

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A view on US earnings season