stock bull,
Thanks for the post. In addition to the reasons you listed, I think there are other reasons to believe that a selloff on earnings is likely with PWER.
First, consensus is $0.21, with the whisper number $0.23.
whisperearnings.com
I anticipate that PWER will at least meet the consensus figure, but it is not likely that they will beat the whisper number. I think that if they beat the whisper number then a selloff might not occur, but for the reasons you list (and management has talked about previously), I don't think they will beat the whisper number.
Also, PWER has ramped impressively going into earnings, trading from 55 less than three weeks ago, to test unsuccessfully its all time high of 89 on Monday and Tuesday.
askresearch.com
Stocks that ramp like this going into earnings are much more likely to sell off on even a very good earnings report than stocks that don't. Also, the last two candles look very hesitant to me, suggesting that the buying pressure is running out of steam, and so the stock was unable to break out above old resistance at its all time high. And, consider that the volume in PWER has been much higher than average for about a week, and way more than enough to cover the buying by institutions secondary to the addition to the S&P 500. That tells me there are a lot of momentum players/swing traders holding now that have contributed a lot to the buying pressure the last two weeks, and will be looking to book profits soon. Add to that the fact that PWER is way ahead of all its moving averages, and has rarely traded above the 10 day moving average for very long.
Looking at the options chains, most of the front-month open call interest is clustered at the 75 strike, but below that, there is a fair amount of open put interest, though it is not clustered at any particular strike. Since the options pits are on the other side of all those November 75 calls, there will be an effort to get the stock price below 75 by expiration date. Below that, there is not a lot of clustered puts, though there is a fair amount of puts, so put-related support will be there, but will not be very solid. So, from the options pits, there will be efforts to get the stock below 75, but not too much below that point, because the lower it goes, the more put contracts go in the money.
askresearch.com
And finally, as I write this the Naz 100 futures quotes are down quite a bit, the S&P futures less so. If these hold for the next couple of hours, we'll see a gap down at the open in the market in general, which will tend to place an upside lid on things in general.
So from several standpoints, PWER looks to be very ripe for a correction, and therefore I anticipate a selloff on earnings news.
As always, JMVHO.................
Regards,
Walkingshadow
Disclosure: Long PWER via long term shares, but short via Nov 85 puts in anticipation of a temporary correction. |
