Six Stocks Slammed by Earnings Misses After Riding High

NEW YORK (TheStreet) -- The six former high-flying momentum stocks profiled in today's technical analysis below were hit hard by earnings misses, as they reported quarterly results that fell short of analysts' estimates.

The technical analysis serves as a guide to help you determine at which levels to buy and sell the stocks.

All six stocks had strong upward momentum until they set all-time or multiyear intraday highs in late 2014 or in the first four months of this year. All six are below their 50-day simple moving averages on their daily charts, while only one is above its 200-day simple moving average. All have negative weekly charts with two having oversold momentum. Two are also below their 200-week simple moving averages.

Let's take a look at the daily charts and strategy profiles.


Courtesy of MetaStock Xenith

Buffalo Wild Wings (BWLD) closed at $158.07 on Wednesday. Most of the price gaps shown are in reaction to earnings. The stock gapped higher to an all-time intraday high of $195.83 on Feb. 6, following a positive reaction to earnings. The stock gapped lower on a negative reaction to earnings on April 29, setting a low of $152.07 on May 6. From high to low, the stock fell by 22%.

Note the importance of the 200-day simple moving average with the breakout above it on Oct. 28, and then the break below it on April 29.

Investors looking to buy Buffalo Wild Wings should place a good-till-canceled limit order to purchase the stock if it drops to $147.02, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holding should place a good-till-canceled limit order to sell the stock if it rises to $185.70, which is a key level on technical charts until the end of June.


Courtesy of MetaStock Xenith

Keurig Green Mountain (GMCR) closed at $102.13 on Wednesday. The stock set its all-time intraday high of $158.87 on Nov. 18 in anticipation of positive earnings. After setting the high, the stock cascaded lower, including a price gap lower on Feb. 5 on a negative reaction to earnings. The reaction low was $109.06 on that day.

The stock then rebounded to as high as $131.09 on March 2, failing at its 200-day simple moving average, which was then at $129.58. Shares then slid lower, tracking their 50-day simple moving average, which is now $116.19. A negative reaction to earnings released on May 6 resulted in a price gap lower on May 7, and the stock traded as low as $95.02. From high to low, the stock plunged 40%. Most price gaps were caused by reaction to earnings reports.

Investors looking to buy Keurig should place a good-till-canceled limit order to purchase the stock if it drops to $80.42, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holding should place a good-till-canceled limit order to sell the stock if it rises to $108.39, which is also a key level on technical charts until the end of 2015.


Courtesy of MetaStock Xenith

LinkedIn (LNKD) closed at $196.87 on Wednesday. The stock gapped higher on Feb. 6 on a positive reaction to earnings and set its all-time intraday high of $276.18 on Feb. 26. From the high, the stock set a series of lower highs and lower lows before reporting earnings on April 30. A significant downside price gap followed on May 1, with the stock setting its year-to-date low of $195.26 on Wednesday. From high to low, the stock fell 29%. Most price gaps were caused by reaction to earnings reports.

Note the importance of the 200-day simple moving average with the breakout above it on Aug. 1. The 200-day held at the low on Oct. 16. The huge downside gap on May 1 was well below the stock's 200-day simple moving average, which is now at $229.19.

Investors looking to buy LinkedIn should place a good-till-canceled limit order to purchase the stock if it drops to $189.80, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holding should place a good-till-canceled limit order to sell the stock if it rises to $249.54, which is a key level on technical charts until the end of May.


Courtesy of MetaStock Xenith

Rackspace Hosting (RAX) closed at $43.75 on Wednesday. The stock had been tracking its 50-day simple moving average higher into 2015, and set a 52-week intraday high of $56.20 on April 27. Then came the earnings avalanche. The stock gapped significantly lower on Tuesday, following an earnings miss on Monday. The stock set its 2015 low of $43.40 on Wednesday, holding its 200-day simple moving average of $43.57. From the high to low, the stock fell 22%.

Investors looking to buy Rackspace should place a good-till-canceled limit order to purchase the stock if it drops to $33.70, which is a key level on technical charts until the end of June.

Investors looking to reduce holding should place a good-till-canceled limit order to sell the stock if it rises to $52.66, which is a key level on technical charts until the end of June.


Courtesy of MetaStock Xenith

Twitter (TWTR) closed at $37.72 on Wednesday. The stock gapped higher on Feb. 6 on a positive reaction to earnings the day before. The stock traded as high as $53.49 on April 8. Twitter's negative earnings report -- which was leaked early on April 28 -- hit the shares hard, as they fell to as low as $36.52 on May 6, down 32% from high to low.

Note the importance of the 200-day simple moving average even for a new stock (the stock's market debut was in November 2013). Also, note the gap below the 200-day on Oct. 28, and then the gap above on Feb. 5, and the gap below on April 28.

Investors looking to buy Twitter should place a good-till-canceled limit order to purchase the stock if it drops to $30.09, which is a key level on technical charts until the end of 2015.

Investors looking to reduce holding should place a good-till-canceled limit order to sell the stock if it rises to $44.09, which is a key level on technical charts until the end of June.


Courtesy of MetaStock Xenith

Whole Foods Markets (WFM) closed at $42.71 on Wednesday. The stock showed strong upward momentum in 2015 after gapping above its 200-day simple moving average on Nov. 6, the day after the company reported better-than-expected earnings. The stock set its 2015 intraday high of $57.57 on Feb. 19. A positive reaction to earnings reported on Feb. 11 helped drive this momentum.

The stock then trended lower until its May 6 earnings report, as the stock plunged below its 200-day simple moving average of $46.38 on May 7 to a year-to-date low of $41.03 on that same day. From high to low, the stock sank 29%. Note the downside price gap below the 200-day on May 7.

Investors looking to buy Whole Foods should place a good-till-canceled limit order to purchase the stock if it drops to $40.64, which is the level that would fill the price gap to the Nov. 5 high.

Investors looking to reduce holding should place a good-till-canceled limit order to sell the stock if it rises to $56.59, which is a key level on technical charts until the end of June.

Investors not familiar with technical analysis should begin with the notion that a price chart for a stock shows a road map of past price performance, which provides guidance for predicting future share-price direction.

Here's how to read a daily chart. There are two moving averages to follow; the 50-day simple moving average is in blue, while the 200-day simple moving average is in green.

Here's how to read a weekly chart. This chart shows weekly price bars going back to the beginning of 2007 and thus includes the crash of 2008, and then the current bull market for stocks that began in March 2009. The red line tracks the ups and downs of the key weekly moving average. The green line is the 200-week simple moving average. The red line that oscillates along the bottom of the chart is the momentum reading on a scale of 00.00 to 100.00. A reading below 20.00 is oversold and a reading above 80.00 is overbought.

A technically positive weekly chart occurs when a stock ends a week above its key weekly moving average with the momentum reading rising above 20.00.

A technically negative weekly chart occurs when a stock ends a week below its key weekly moving average with the momentum reading declining below 80.00.

This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.

More from Opinion

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

3 Warren Buffett Stock Picks That Could Be Perfect for Your Retirement Portfolio

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

Tuesday Turnaround in Politics: Is a Trade War on the Horizon?

Tuesday Turnaround in Politics: Is a Trade War on the Horizon?

Many Chip Stocks Look Cheap Here, as Long as the Economy Holds Up

Many Chip Stocks Look Cheap Here, as Long as the Economy Holds Up

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense

Apple Buys Tesla? Amazon Buys Sears? 3 Dream Mergers That Just Make Sense