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Two ways to make money this earnings season

As earnings season heats up, two stocks could make for prime trading opportunities.

Rich Ross, head of technical analysis at Evercore ISI, is bearish on American Express ahead of its earnings report, set to be released Wednesday after the bell.

American Express has been "under pressure for quite some time," Ross said Tuesday on CNBC's "Trading Nation," examining a three-year chart of the stock showing several hills and valleys including its steep drop in 2015.


"We have a phenomenal run in this stock off those lows, then you have another rollover this summer. You dip once and then after a run back into the 50-week you dip again and there's the stock, sitting on the key support at $60," he said.

Ross would be a seller of American Express "on any post-earnings strength."

"I have very low expectations for this stock, which could be a positive catalyst, but that's not how I would play it," he said. "This is a stock that looks structurally broken, in a longer-term downtrend in a fairly buoyant market, and that's a bad combination."

Meanwhile Dennis Davitt, chief investment officer of Harvest Volatility Management, is bullish long-term on Twitter, which is set to report earnings Oct. 27.

"But there are some heavy seas ahead," Davitt wrote to CNBC in an email.

Keeping that in mind, Davitt believes that bullish call options are an ideal way to "lower the volatility of the stock," he wrote, expecting that a big move could come on earnings in either direction.

"Right now the options are pricing Twitter to do a 12 percent move. We've seen Twitter move over 12 percent for the last eight earnings cycles on the announcements of earnings," Davitt said Tuesday on "Trading Nation."

"I think owning an option package on Twitter that costs 12 percent will pay for itself."

Indeed, he points out that when buying a call option, one loses only the premium paid "if you're completely wrong and the stock opens up unchanged, but you get outsized returns without risking much capital."

Davitt projects rumors of a buyout will come up in the company's earnings conference call; he says the options market has not priced in a potential deal.

Rumors earlier this month that Salesforce would snatch up Twitter were ultimately squashed after Salesforce ruled out a bid for the social media stock.

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Trading Nation is a multimedia financial news program that shows investors and traders how to use the news of the day to their advantage. This is where experts from across the financial world – including macro strategists, technical analysts, stock-pickers, and traders who specialize in options, currencies, and fixed income – come together to find the best ways to capitalize on recent developments in the market. Trading Nation: Where headlines become opportunities.

Brian Sullivan

Brian Sullivan is co-anchor of CNBC's "Power Lunch" (M-F,1PM-3PM ET), one of the network's longest running programs, as well as the host of the daily investing program "Trading Nation." He is also a frequent guest on MSNBC's "Morning Joe" and other NBC properties.

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