Welcome to Michael Kramer’s pick of the top three market events to look out for in the week ahead.
US company earnings will be in the spotlight from Tuesday as leading Nasdaq-listed technology stocks Tesla, Google parent Alphabet, and Amazon prepare to report results. On the macroeconomic front, interest rate chatter should quieten after the European Central Bank held its main interest rate at 3.75% on Thursday, while the US Federal Reserve has entered a blackout period ahead of its 30-31 July rate meeting. The announcement on US second-quarter GDP this coming Thursday – which is expected to show that the world’s largest economy grew 1.8% in the three months to the end of June – is unlikely to be market-moving unless the reading misses estimates by a wide margin. Instead, most traders and investors will be focused on the June personal consumption expenditures (PCE) price index report, out on Friday.
Tesla Q2 results
Tuesday 23 July
Analysts expect Tesla’s second quarter results, due out after the US market closes on Tuesday, to show earnings of $0.58 a share, down from $0.91 in the year-ago period, on revenue of $24.1bn, down from $24.9bn a year ago. Gross margin is expected to have contracted during the quarter to 17.4%, versus 18.2% a year ago. The market sees the stock rising or falling by around 8.3% following the results, based on options pricing.
Tesla shares have rebounded of late, rising by more than a third in the past month to around $250 by Thursday’s close, as the company announced that it delivered more vehicles than expected during Q2. And now the options market appears to be betting on further upside following the results. Implied volatility levels for Tesla options expiring on 26 July were above 80% as of 18 July, and they’re likely to continue rising as we approach the earnings release. Most of the option positioning in the stock is for further upside, based on call delta and call gamma values, with the strike price at $270 serving as resistance. A move above $270 could send the stock sharply higher, while a failure to push beyond $270 could draw sellers into the market.
The stock reached overbought levels around 10 July, when its relative strength index peaked at 87 points and the share price broke above the upper Bollinger Band. The shares also hit a technical resistance level at $265. Since then, the share price has consolidated, moving sideways while remaining below resistance. The stock also appears to have completed an inverse head and shoulders pattern, as indicated by the blue lines on the below chart, suggesting that the shares could retest the breakout level near $210 in the days and weeks after the Q2 results.
Tesla share price, January 2023-present
