Enterprise cloud software applications provider Workday (NASDAQ: WDAY)
has capitalized on the cloud migration of the largest players in the Fortune 200, Fortune 500 and Global 200 companies. Their full suite of enterprise applications provides a fully integrated single source of truth platform for corporations. The human capital management (HCM) division, representing 20-percent of overall revenues, powered 50-percent YoY topline growth as presented in their Q3 2020 earnings conference call. Momentum in the shares have been strong since bottoming out in the 157s after last quarter’s sell-off. However, the recent plunge in the S&P 500 (NYSEARCA: SPY)
benchmark index has caused a major reversal in market sentiment for all players in the enterprise software space. The upcoming Q4 fiscal 2020 earnings will determine if WDAY can fight the downturn.
WDAY reports Q4 fiscal 2020 earnings post-market on Thurs. Feb. 27, 2020, followed by the 4:30 pm EST conference call. Consensus analyst estimates are for 0.40-EPS profit on revenues of $965 million. Investors are braced for any guidance adjustments stemming from coronavirus impacts on global supply chains and workflows. Over five-million businesses have been impacted by the ripple effects of coronavirus. Margin improvement, subscription growth and continued acceleration in the CRM division will all impact the narrative from the earnings release. Additionally, continued wins in the Fortune 500 accounts for the financial division and status of the procurement application. Investors are hoping to not repeat the Q3 gap down, especially in light of the market reversal heading into earnings.
Rifle Chart Technical Analysis Trajectories: Longer-Term
We use the rifle charts on wider time frames to lay out the playing field suitable for swing traders and investors. The WDAY monthly chart has a potential triangle as the range gets tighter leading to a directional breakout above 201.01 fib or breakdown below the 169.78 fib. WDAY monthly rifle chart is in a make or break situation with a potential bearish mini inverse pup under the 5-period (PD) moving average (MA) at 172.96 Fibonacci (fib) level. The monthly 15-pd MA sits at the 181.73 fib in a stalled down trend. If the monthly mini inverse pup triggers, then a move towards the lower BBs near the 118.63 fib is possible. The weekly stochastic peaked and fell below the 80 band. The weekly 15-pd MA sit at the 176.88 fib and 5-pd MA at the 185.84 fib setting up its own make or break. The daily 5-pd MA sits at the 184.80 fib, with key support at the 169.78 overlapping super fib. The daily rifle chart has formed a downtrend but already near the lower BBs with key overlapping support at the 169.78 fib. The daily BBs are in expansion mode as the lower BBs at the 172.96 fib should trigger a coil attempt before the monthly triangle breakdown or breakout emerges.
WDAY has positive correlation with other enterprise cloud application providers. The most immediate sympathy mover is Salesforce.com (NASDAQ: CRM) followed by Splunk Inc. (NASDAQ: SPLK) and Oracle (NASDAQ: ORCL) . ORCL has the most liquidity and is best suitable for newer trades to trade in sympathy if WDAY has enough momentum on a large price gap (above 10-percent).
Trading Game Plan for Earnings Gap:
This information is accommodative to intraday and short-term traders looking to play the earnings gap. With a post-market earnings release immediately followed by the conference call at 4:30 pm EST. Only the nimblest traders should even consider hitting the immediate reaction on the post-market release. These 4:30 pm EST conference calls are becoming more common with reporting companies lately. Nimble post-market traders can scalp the price gap reversion levels, but most should wait for the morning session off the opening bell. Traders can expect scalps ranging from 0.50 to 2.00 in the first 20-minutes as ranges and spreads eventually contract. Reversion scalps off the key price inflections levels can be played for the second gap reaction then shift focus to the third reaction trend move. The gap price reversion levels for the upside price gaps are: 185.84 fib, 191.46 fib, 197.86 fib, 201.01 upper monthly triangle trend line/fib and 207.27 fib/sticky 2.50s zone. Downside gap reversion price levels are: 172.96 fib, 169.78 lower monthly triangle trend line/fib, 163.15 fib, 157.61 fib and 153.72 fib. If WDAY manages to gap beyond the upper or lower monthly trend lines, then consider tracking the sympathy stocks CRM, SPLK and ORCL for laggard trades once a positive correlation is confirmed. ORCL offers the most bang for the buck due to its thick float and liquidity as scalpers can target 0.05 to 0.20 heavier sized scalps.