Trading Nation

With more than 100 S&P 500 earnings releases this week, traders say these are the two to watch

Trading Nation: Tesla, Apple set to report earnings next week
Trading Nation: Tesla, Apple set to report earnings next week

It's one of the busiest stretches of the earnings season.

More than a fifth of the S&P 500 companies and 13 Dow components will report on their latest quarter this week – those earnings range from bellwether tech companies such as Microsoft to industrials giants such as Caterpillar and 3M.

Craig Johnson, chief market technician at Piper Sandler, says there's one earnings report that is the "elephant in the room" – Apple.

"It's a big part of all these indexes," Johnson told CNBC's "Trading Nation" on Friday. "Apple's going to be the one to watch, and it's going to set the tone, just like what you've seen with Netflix, it set the tone with some of these FANG stocks."

Apple, the largest publicly traded stock, has a roughly 7% weighting in the market cap-weighted S&P 500. It is set to report on Wednesday afternoon. Analysts surveyed by FactSet anticipate 13% earnings and 12% sales growth in its December-ended quarter.

Johnson said Apple is setting up for a technical breakout should enthusiasm after earnings propel the stock higher. He identified a cup-and-handle pattern that has formed in the charts — a bullish technical sign characterized by a rounded bottom and period of consolidation that suggests a pause in the stock before it trends higher.

Apple isn't the only high-profile report out this week. Danielle Shay, director of options at Simpler Trading, is watching new S&P 500 component Tesla. which also releases its results Wednesday afternoon.

"Tesla has been doing absolutely fantastic and it's beat earnings expectations the last five quarters," Shay said during the same interview. "I think this is Tesla's opportunity to prove to everyone that the retail traders aren't wrong on this one, and if we do get a great beat from Tesla, I really think that it could lead to a pretty strong momentum move."

Shay targets $1,000 for Tesla shares — an 18% gain from the current level. Tesla was one of the hottest stocks in 2020, rallying more than 1,100% since its March bottom.

"However, if this doesn't come through, and we end up seeing Tesla pull back, in that instance it will just be a great buying opportunity," said Shay.

Analysts expect Tesla to have earned $1.04 cents a share in its December quarter, more than double a year earlier. Sales are expected to have grown 43%.

Disclosure: Shay holds TSLA.