Even though it looks like the Fed is pushing stocks over the edge at the moment, it’s going to be the earnings that are the next shoe to drop.
We want to watch earnings, especially in the consumer and retail space, to gauge the underlying strength of the economy.
This week, it is the wholesale membership giant, Costco (COST) and uniform rental and facility services company, Cintas (CTAS).
Both are respectable indicators of the consumer and retail business trends.
And I’m going to do it Bank It or Tank It style today because I think these stocks are going to offer some potential trading opportunities in the coming weeks.
By adding them to my Bank It or Tank It list, they will become tradeable stocks in my Flash Alerts service that builds on these free insights.
Let’s dive in…
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Costco Wholesale (Nasdaq: COST)
Earnings: September 26. After the Close.
Consensus: EPS $4.72, Revenue $77.96B.
Avg. Analyst Rating: 2 (Buy), Price Target $573.20.
Costco is a favorite company of mine.
I get gas from there all week long and hit them up a few times a month for bulk goods (along with a hot dog).
But I will say this… there’s been no slowdown in traffic for Costco in South Florida.
That may not be true around the country, but that’s where earnings could give us a closer look this week.
More importantly, we’ll get a reading on any pressures on price, wages and spending this week.
As for the stock, it’s looking pretty nice at the moment.
Shares are holding higher in what appears to be the makings of an ascending price channel.
Those two trend lines are converging rapidly, so a breakout is imminent even without a big move on earnings this week.
Traders are only betting on a small move on earnings as the options market is pricing in a 1.6% move, up or down, this week.
That’s nothing.
Shares of can easily move more than that on a normal day.
Much less a volatile event like earnings.
So there is a potential straddle play here, as buying both a call option and a put option can pay some nice profits as long as it moves more than 3% this week.
Next up, Cintas.
Cintas Corporation (Nasdaq: CTAS)
Earnings: September 26, Before the Open.
Consensus: EPS $3.65, Revenue $2.34B.
Avg. Analyst Rating: 2.2 (Buy), Price Target $534.08.
Cintas is much smaller compared to Costco, but still a sizeable company in its own right.
Also, nice to see analyst having a price target that is 6% higher than where it is currently trading. Shares have some room to climb, and its price chart hints at that.
The stock is trending in the middle of this rising price channel.
We could see some wiggle room on earnings, but based on this chart, if we get a drop to the bottom of the range, this stock is a great buy.
If it breaks out to the upside, it is also worth chasing as the breakout will lend itself to even more gains.
But if shares fall below that green support on earnings, it’s time to turn bearish on the stock and expect more pain ahead.
For now, I’ll put CTAS on my Bank It list because it is in a rising price channel which is a bullish price pattern.
Until that changes, you want to use the dips as a buying opportunity.
That’s all for today.
Regards,
Chad Shoop, CMT
Editor, Bank It or Tank It ELITE