Well, the Quarterly Earnings Report is due out tomorrow after the market close. Today we closed right on the 8ema. I think today and tomorrow, and maybe yesterday, we're just going to consolidate until the Report. So Technical Analysis probably doesn't even matter.
At this point the big question is whether to hold the position over the Earnings Report. There are 3 possible cases. Earnings exceed expectations, a "beat". Earnings fall short of expectations, a "miss". Or, Earnings are close to expectations.
If we get a beat, and the stock takes off to the upside, then the greater daily pattern will be a J-Hook if you include the previous up leg, or a Cup & Handle if you just look at the recent dip since Christmas.
If we get a miss, and the stock takes a dive, then we have a Double Top formation on the Daily chart.
If the Report meets expectations, then the previous pattern should continue on, which has been Bullish.
Normally, I don't like holding over ER's because they are a crap shoot. There is a method to calculate a statistical expectation. You look through the history of ER's and simply count the number of each of the 3 possibilities and calculate the percentages. I'm not sure if that actually gives you an edge or not.
However, in this case, we have a very bullish technical setup, which you can argue is an indication the market believes we won't get a miss. Two out of the three possible outcomes are bullish. Also, if you look at the price range the past 4 months have covered, its like 18 - 25, which doesn't look very dangerous. In addition, our position is in long options, which have a fixed maximum loss equal to the cost of the options.
So, given the specific circumstances of this particular trade, I'm leaning towards holding the position over the Earnings Report tomorrow after the market close. I'll decide near the Close tomorrow, after having seen the day's price action.
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