Following a long list of the major companies in the sector reporting earnings over the past week, Financials have been the second strongest sector. With a 2.5% gain since the start of last week, the Financial Sector (XLF) has become extremely overbought. Even at these levels, there are a number of attractive charts, some of which thanks to their response to earnings.
Of the companies shown below, American Express (AXP), Goldman Sachs (GS), Morgan Stanley (MS), Torchmark (TMK), and Travelers (TRV) all reported earnings within the past week. The reactions have ranged from explosive, like TMK and TRV, to more subdued, like GS. Running down the list, popular credit card company American Express reported on Thursday beating EPS estimates but also falling short in terms of revenues. The stock still rallied 1.71% in response, bringing it just above highs from late last year and earlier this year. Today, the stock has pulled back slightly but is up from the open.
GS reported one week ago last Monday. Similarly seeing a top line miss and bottom line beat, GS fell 3.82% on the day. While earnings may not have acted as a catalyst, the stock saw some buying in the days since its report, bringing it above its recent range before failing at the 200-DMA.
Reporting mid-week (4/17), Morgan Stanley (MS) beat both EPS and sales estimates leading it to rally 2.64% into extreme overbought territory. The stock has fallen off of these levels but this strong run has been a nice sign following a long term downtrend through most of last year and a flat start to 2019. This recent run higher has brought it out of this year’s range as well as above the 200-day.
Similar to MS hitting extremely overbought levels, Torchmark (TMK) and Travelers (TRV) both rallied 2.88% and 2.25%, respectively, in response to their earnings last week. For TMK, like American Express, the earnings report was just the push the stock needed to retouch 52-week highs after what was looking like a flat year. Meanwhile, TRV has been in a solid uptrend all year. The stock couldn’t hold onto highs from Thursday’s response to earnings, but it has set a precedent for a move higher.
After a somewhat rough 2018, uptrends are common among Financials this year. After a brutal downtrend all last year, Invesco (IVZ) finally found a bottom alongside the broader market and has been making a series of higher lows and higher highs ever since. At its current levels, it has gotten a bit extended so a pullback like we saw multiple times earlier this year is increasingly possible. Regardless it has had a clean chart and in the past couple of weeks has closed above the 200-DMA for the first time since last March.
While their 2018 downtrends may not have been as long or clean as IVZ, Moody’s (MCO), T Rowe Price (TROW), and S&P Global (SPGI) each have a similar chart to IVZ with a steep downtrend last year and a solid uptrend so far this year. TROW and IVZ both have a lot of progress to still make until they retake last year’s highs, while MCO and SPGI have made considerable pushes and are now solidly above prior highs. Both of these are also a bit more attractive at current levels as they are sitting at the bottom of their uptrend line. TROW and MCO both report later this week while SPGI is out on May 2nd.
Staying on the topic of uptrends, Marsh & McLennan (MMC) did not see the same type of downtrend in 2018, rather it saw a fairly choppy sideways trend with increasing volatility into the end of the year. But following a surge after its February earnings report, the stock has been in a steady uptrend. It is now coming off of overbought levels to the bottom of its uptrend channel and just barely overbought, meaning it could begin to reverse higher, continuing its uptrend soon. Start a two-week free trial to Bespoke Premium to access our interactive Chart Scanner and much more.