Stock Dips Down Lower After Earnings.
Embraer has been gaining popularity quickly by the consumer around the world. As I personally attended the National Business Aviation Association conference in Oct 2019 I was able to get a first hand view at some of the new aircraft that Embraer have been developing.
Personally speaking from my own perspective I was very impressed with the quality of the aircraft. In the static display they had a majority of their smaller business class jets.
Ranging from their smaller Phenon 100 Evolution to their large Praetor 600 Embraer has developed a reliable fleet of aircraft ranging in size which would appeal to a wide range of clients.
In addition to their business class aircraft and commercial aircraft which has been touring the globe demonstrating their ability to increase profits to regional carriers they are also in the defense industry.
All in all I can personally say I am a fan and really enjoy seeing how the brand has been able to develop and grow over time to where they are today. Their aircraft all impress me not just based on operating cost and performance factors, but also in the physical appeal .
The aircraft look gorgeous on the ramp and overall have great presence both outside and most importantly inside. Any guest on board will certainly be impressed with the interior of any embraer aircraft.
Embraer KC-390 has recently made its first delivery to their client and they have orders for many more. The application for this aircraft in developing countries to be able to transport supplies and troops more effectively will aid the defense industry of countries lacking the resources.
With all the positive bias on my end we saw the stock price drop dramatically today after their earnings report. I personally am looking for the long term positive bias for Embraer although on the short term we are experiencing some major pullbacks.
Let’s look at some of the factors that are in place that have resulted in NYSE: ERJ dropping down in value on earnings.
Fundamental:
Embraer has been taking advantage of the Turmoil that has been occuring with Boeing. They took out their regional airliner and started touring it through the globe visiting locations around the world and conducting demonstrations and tours.
They have been getting great amount of attention as more airliners have been looking at alternatives since the 737 MAX has been grounded. Just recently Boeing has announced optimism towards getting their aircraft in the sky again.
Right as they announced their optimistic towards the aircraft we see a sharp spike in NYSE: BA. This pressure of investors turning back towards Boeing may have pushed attention away from Embraer. Money usually flow where attention goes and as more headlines are out talking about Boeing more investors start looking to enter trades.
As there is less volume of trades for ERJ then it allows for large institutions to sell their positions and drop the stock price quickly.
News:
Today we we saw the earnings release come out for Embraer. As we see below the number come out a bit lower than we have projected. Earnings releases are major market movers. Its important to always know when earnings will be release for companies that you are trading.
Unexpected news could bring volatility to your account. Our goal is to be proactive in the market and not react post event.
Total revenue is under by .16 B and EPS dramatically lower than what was projected. This was not helping as we had a mix of optimism towards Boeing in combination of weak earnings which resulted in a quick sell of of shares in today’s market.
I personally traded a small put option on the release of the news and was able to generate some profits during the move to the downside in the intra-day trading session.
Technical Analysis:
When I look at the chart for ERJ from a technical traders perspective I am seeing price dip down below support on the break of earnings. Currently price tested back up and is sitting on support.
There is a potential that price respects the major support zone and begins to test around the price level holding the value in the current range. There is also potential to continue down towards the diagonal trend line which is the overall trend of the current price.
Although the stock is down trending and is making new lows we are at the lower end of the price range. So in terms of the overall value of the stock there is greater potential of an upwards movement. Although keep in mind this is just a bias based on the graph alone.
As trader we need to always take into consider the three main factors; Fundamentals, news and lastly the technicals. We need to use the fundamental and current news to create a story and direction for the stock to move in.
Then we look to the technical chart to determine exact entry and exit points for our trades. This helps us determine key price zones to look for towards confirmations before entering a trade.
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