Buy the Earnings Dip in Cloudera? Let’s Look at the Charts

Cloudera is getting hit on earnings despite beating on its quarterly estimates and provided better-than-expected guidance. Let's look at the chart.
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Cloudera  (CLDR) - Get Report was off about 10% on Thursday, dipping from its recent rally after reporting earnings.

Does the stock deserve such a clocking? Perhaps not, but that’s the price action we’re getting on Thursday as the Nasdaq finally pays the price - at least for a day - for running so hot for so long. The index is off almost 5% on the day.

For Cloudera, the company reported second-quarter earnings of 10 cents per share, which came in 3 cents ahead of expectations. Revenue of $214.3 million topped analysts’ expectations by $6.25 million and grew 9% year-over-year.

Even better, margins beat expectations while management’s revenue and earnings outlook for the third quarter and full year all topped consensus expectations.

That’s got investors wondering if this selloff is indeed an overreaction. Would the stock be up if the Nasdaq were up? It doesn’t matter. Let’s look at the charts.

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Trading Cloudera Stock

Daily chart of Cloudera stock.

Daily chart of Cloudera stock.

Cloud stocks have been doing exceptionally well since Salesforce  (CRM) - Get Report crushed earnings on August 25th. Since then, Cloudera, Salesforce and others have been enjoying big-time gains. In fact, the report really kicked off a strong rally in the entire tech sector.

Above is a weekly chart rather than a daily chart. It shows the long-term has been lower, which led to a double-bottom near $5. That bottoming action led to Cloudera finally breaking out over its downtrend and notching its first higher high in quite some time (shown on the chart with a purple arrow).

That’s the setup we’re working with now.

Shares topped near $14 in June, before pulling back and carving out a very nice low near $11. The stock again topped at $14 this week ahead of earnings and is now pulling back.

From here, I want to see if the 10-week moving average can hold as support. So far, that seems to be the case. But should it fail, it will likely put the $11 mark back in play.

That level — aside from being support this summer — coincides with the 20-week moving average. If that fails as support, it puts $10 or lower back in play.

On the upside, bulls would prefer to see the 10-week moving average hold as support, giving the stock a higher low, followed by a rotation back up to (and preferably through) $14.