We’re just one day removed from the initial coronavirus scare in China, and the market is already starting to recover from Tuesday’s loss. Bulls have short memories, it seems, and until the coronavirus truly hits epidemic levels, equities don’t appear ready to drop.
A few stocks in particular did very well, like AT&T Inc. (NYSE: T), which enjoyed of its best daily gains (1.4%) in weeks. After bottoming out a few sessions ago, T shares are making another run at a new yearly high – something that the stock could possibly hit before earnings on January 29th.
In the daily candlestick chart above, you can see that T has already logged a winning long trade within the last few months. Back in early December, we examined a bullish setup after T set a higher low (relative to a low not pictured). It also bounced off the lower Bollinger Band (BB), which is always a good sign preceding a long trade. The stock broke out of its minor bearish trend (represented by the left yellow trendline) and went on to produce a moderately profitable position.
It wasn’t the best trade ever, but it racked up a nice gain for short-term traders willing to take a shot on the telecom giant.
Now, after selling-off a few weeks ago, T’s at it again. The stock set another higher low and, just like last time, broke out above its minor bearish trend (represented by the right yellow trendline). It also just hit the lower BB, and the stochastics indicator suggests that the stock is not yet overbought. With share prices looking ready to rise further, it could be a just a day or two before T truly “pops.”
If the stock rises above the most recent daily candlestick’s high by a significant amount, it might make sense to go long with a trade trigger of $39.34.
And even though earnings are rapidly approaching on 1/29, we still have four sessions for T to move. This is a great example of a “snapshot trade,” in which bulls can get in, snag some quick gains, and get out. With anticipation rising pre-earnings, it wouldn’t surprise me at all to see T roar into next week.
Going long, in this case, would allow short-term traders to capitalize on the pre-earnings hype.
But only, of course, if T passes our trade trigger of $39.34. Based on the current price action, though, it certainly seems likely given the stock’s very positive momentum.
