How Robinhood's Stock Looks Heading Into Its Q3 Earnings Print

Robinhood Markets, Inc HOOD is set to print its third-quarter earnings after the markets close on Tuesday. The stock has been heavily beaten down since reaching an all-time high of $85 on Aug. 4.

The stock fell further following its second-quarter print, largely due to a number of analysts voicing concerns over Robinhood’s revenue stream where cryptocurrency transactions made up 52% of Robinhood’s total transaction-related revenue, and of the number 62% of its revenue came from Dogecoin transaction fees.

Robinhood also issued a warning that its third-quarter results would be impacted by lower trading activity due to seasonal headwinds. Traders, investors and analysts will not only be watching to see the trading platform’s bottom line but also whether Robinhood has been able to increase its daily active users substantially throughout the quarter.

With the stock trading down over 50% from its all-time high, positive guidance from the company could potentially have a very bullish reaction for the stock. Of course, holding a stock or options through earnings is akin to gambling because a stock can fall on a positive print and soar on negative results.

See Also: How to Buy Options on Robinhood

The Robinhood Chart: Robinhood has been trading in a fairly consistent downtrend since its all-time high, making a series of lower lows and lower highs beneath a descending trendline. On Oct. 19 the stock broke up from the trendline and held above the level for two trading days before falling back below the trendline on Oct. 22. The brief bullish break can be considered a bull trap.

On Monday, Robinhood fell below a key support level at $39.23 but bounced up from the $38.15 level, which caused the stock to print a bullish hammer candlestick on the daily chart. A hammer candlestick often forms at the bottom of a trend and can indicate a reversal to the upside is in the cards. On Tuesday the stock was consolidating the move lower by printing an inside bar.

Traders and investors may be waiting to see Robinhood’s results before choosing whether to play bull or bear. It can be positive for the bulls when a stock doesn’t run up into a known even, such as earnings, because it decreases the chances that positive earnings will be a ‘sell-the-news' event.

Robinhood is trading below the eight-day and 21-day exponential moving averages (EMAs), with the eight-day EMA trending below the 21-day, both of which are bearish indicators. The stock is also trading below the 50-day simple moving average, which indicates longer-term sentiment is bearish.

• Bulls want to see big bullish volume come into Robinhood’s stock on Wednesday to break it up from the inside bar pattern and above the descending trendline. The stock has resistance above at $42.44 and $45.96.
• Bears want to see a bearish reaction to earnings and for big bearish volume to drop Robinhood down below Monday’s low-of-day. The stock has support below at $39.23 and at the all-time low of $33.25.
  
  Want direct analysis? Find me in the BZ Pro lounge! Click here for a free trial.