The Earnings Trade: Autodesk
Autodesk, Inc. (NASDAQ:ADSK) is due to report earnings on, August 14. This makes now a great time to analyze the chart and get ready for a possible gap up/down after the earnings announcement. With the movement of the stock, it will likely trade into support/resistance levels which will be great trading opportunities.
The daily chart of Autodesk, Inc. (NASDAQ:ADSK) does not look bullish at the moment. As you can see in the chart below, Autodesk, Inc. (NASDAQ:ADSK) is trading below both the 20 (yellow line) and 50 (red line) day moving averages. This is a sign of weakness. Over the last week or so Autodesk, Inc. (NASDAQ:ADSK) has also formed a bearish wedge, and it is trading inside of a wide range sell off candle from Jul 31st, which could be another sign of weakness.
Let's look deeper into the chart and see what it is telling us...
At this time Autodesk, Inc. (NASDAQ:ADSK) daily chart looks bearish, which makes me favor the downside.
The Downside Trade:
If Autodesk, Inc. (NASDAQ:ADSK) falls after reporting earnings, the $50.00 level will be a buying opportunity for a quick intra day move up. If the stock should open below that level, the next level of support for a quick long scalp will be $47.82.
Trading A Move Higher:
On the other hand, if Autodesk, Inc. (NASDAQ:ADSK) rallies up after the earnings announcement, the $58.75 level will be where the stock will find a lot of resistance. Please note, that while I favor the downside for Autodesk, Inc. (NASDAQ:ADSK), I never trade any stock ahead or earnings. These levels can be used for short/long scalps after the earnings announcement. The reason for not trading right ahead of earnings is because doing so is essentially gambling. That is a time when the amateur traders pile on their positions on the basis of expecting a certain result from the reports - us smart traders know these reports cannot be trusted. Also, a known rule is that "the first move is often the wrong move." Therefore, the experienced traders will let the earnings announcement whips occur, which often throw the little trader out of his position. While, we (smart traders) wait and trade the reaction based on the most reliable and pure factor, the charts. That is how you should trade earnings of not just this stock, but all. Doing so will keep you from being the gambler, and help you be the smart trader.