Clear consolidation ahead of earnings, downside risk higher than upside

ASML is set to report its earnings tomorrow as one of the first big semiconductors to do so. Currently, its US-listed shares are trading at around $1074.83 a share in the pre-market trade. The daily chart shows that over the last couple of days, there has been some consolidation taking place, most likely due to the increased buying and selling ahead of the earnings. This implies that there could be a significant move in either direction, with the trendline support below holding tight for now. However, a break below this trendline may see some worries arise in the near term. There is support around $994.10 that would become the focus in that scenario. Some Wall Street giants have raised questions of valuations recently, with valuations sitting at the high end. Even though high valuations do not always drive market prices, as there are many other metrics that help drive market growth, they can impact short-term outlooks. On the other hand, if earnings beat expectations with guidance revised to the upside, momentum can continue just as easily. The resistance in focus for investors here is the level of $1112.97. A break and close above this level following the earnings, $1150 may become the next psychological resistance point. Looking at the technical indicators, the momentum has somewhat faded, which is due to the recent consolidation phase. They are most likely to remain in a similar position until the earnings are released.