The earnings report was very negative. The company said adjusted earnings per share were 96 cents, vs. analysts' expectations for $1.17. Revenue was $9.16 billion, vs. expectations for $9.38 billion.
Even with these disappointing results, the price action was exaggerated, as shown on the chart.
Several signals coincided on earnings day. The bullish piercing lines is a bullish signal, but price was driven down 9.76 points after the earnings announcement. This large price gap would normally lead to a reversal of at least a portion of the drop, as negative earnings reaction is invariably exaggerated. This was confirmed by the exceptionally large volume spike and by momentum moving more than 5 points into oversold territory (as measured by the relative strength index).
This combination of price, volume and momentum signals a likely short-term bullish reversal. A short-term bullish trade using stock options makes sense, given the extreme price decline of Monday. As of the close on that day, the Dec. 2 options (expiring in 10 days) showed the 60 call at an ask price of 0.55. Adding trading fees, this option can be bought for $64. The break-even level for the stock on this trade is $60.64. With a closing price of $57.60, this requires a 3-point move over the next 10 days. This does not appear unlikely given the 9.76-point drop on earnings day.
Based on how the price changes by the time a trade is entered, the strike may be adjusted to more closely match current conditions.