Skillz Was Shot Down And Needs An Earnings Win

Skillz Inc SKLZ is set to report earnings after the close Tuesday amid bearish sentiment in the stock.

When Skillz reported fourth-quarter results, its revenue had increased 95% year-over-year to $68 million, compared to $35 million for the same quarter in 2019. Following Skillz’s earnings report, shares gapped up over 8% but immediately sold off and closed flat.

In its last report Skills also initiated guidance for full-year 2021 of $366 million. Traders and investors will gain insight into whether the milestone is achievable after seeing the company’s first-quarter 2021 results.

A stock does not always react positively to an earning’s beat or negatively to a miss, however, and traders often compare buying options or shares of a company to hold through earnings to playing the lottery.

A rule of thumb for trading a company’s earnings is that if a stock has had a large run north into its earnings even it’s likely to sell off regardless of whether the report is positive or negative.

In contrast, with Skillz stock selling off into earnings a positive report could cause a big bounce.

See Also: Skillz Makes A Bullish Breakaway And Options Traders Think There's More Where That Came From

The Skillz Chart: On Monday Skills tried but was unable to regain $18.10 as support.

The stock broke bullish from a three-month long downtrend on April 21, but wasn't able to sustain enough bullish volume to hold above the $18 level and retreated back 23%.

Skillz is trading below the eight-day and 21-day exponential moving averages with the eight-day EMA trending below the 21-day EMA, both of which are bearish indicators. Skillz’s stock also lost the 200-day simple moving average (SMA) on Thursday indicating overall sentiment in the stock is bearish.

Bulls want to see a positive reaction to Skillz’s earnings and for big bullish volume to come in and pop it back over resistance at $18.10. If it can hold that level it has room to move towards $23.23.

Bears want to see the eight-day and 21-day EMA and the 200-day SMA to continue to push Skillz down towards the next support level at $15.90. If the stock is unable to hold that level of support it could revisit the $12.50 mark.

SKLZ Price Action: Skills was trading higher by 3.8% at $17.17 at publication time