Daily Wrap
DJIA -46.92 (-0.34%) to 13,880.62; S&P 500 -9.53 (-0.63%) to 1,502.42; NASDAQ -32.92 (-1.04%) to 3,131.49
Today we had a slew of economic data which included a Jobless Claims number that came in higher than consensus estimates (362K vs 353K). As always you can visit the Event’s Calendar for the release of economic data, scheduled meetings and other news that could move the market. The markets were unable to build much positive momentum after yesterday’s decline and we marked a second straight day of declines. The Dow saw the least damage but that was somewhat deceiving due to an end of day rally by Hewlett-Packard (HPQ) into their earnings report which was scheduled for after the close.
Speaking of HPQ, their numbers looked quite solid including a Q1 beat on both EPS (82c vs 71c) and revenues ($28.4B vs $27.79B) but they also guided for the year of 2012 above consensus expectations ($3.40-3.60 vs $3.32). November 2012 HPQ was trading in the 11’s and after today’s report we will likely see HPQ trading in the 18’s on the open. After such a strong run I would normally be hesitant to consider a name anymore but looking over HPQ’s 2013 full year expectations and it is hard to argue it cannot go higher. I would like to see some of the short term money come out leading to a consolidation that will provide a better swing entry point but much of that will depend on how the name opens and trades thereafter. I have a long term trend line that comes in around $18.50 that might provide the next resistance and opportunity for a pullback.
As you know I watch the analyst comments on the street and especially the upgrades and downgrades. It always catches my eye when a name has multiple comments or analyst moves and that was the case today for a name that I had recently had on a watch list of mine. That was VeriFone (PAY). One of the reasons I had PAY there was because the stock had an ok technical pattern and I saw firms had price targets on the name much higher. One in particular was Citi which has a $47 price target on the name going into earnings yesterday evening (Citi downgraded and lowered their target to $23 today). PAY’s EPS report was really just a disaster not only missing Q1 EPS and revenues but guiding well below Q2 consensus estimates. The company cited weakness or canceled projects in the US, Europe and South America. It will be tough sledding for the name for a while I assume and will likely not have any interest until I see at least one more EPS report. Fortunately the name never came close to triggering a trade but this is another great example of why I personally don’t trade into earnings. As a reminder that you can review the list I compile each day as well as an archive of past days in the Upgrades/Downgrades section.
Also moving lower on earnings today was Tesla Motors (TSLA), TSLA lost more than analysts expected but they did manage to log higher revenues. What I found interesting is their Q1 guidance stated they could see net income that is slightly positive while analysts were expecting a 17c loss. There seemed to be some disagreement amongst the analysts as Bank of America/ Merrill downgraded the name and RW Baird reiterated their Outperform rating with $45 price target (roughly 30% increase from today’s close). I think even with a bullish stance on TSLA, you can wait a few days to allow a trade-able low to present itself and then have a clear stop.
The following noteworthy companies are scheduled to report earnings before tomorrow’s open: ANF, IPG, PNW
Nothing goes up forever and this is why the stance has been to continue to play names but decrease risk by lower the amount of capital allocated to new trades. So far the S&P 500 has held 1500 and a previous key support area but if we lose that level I would be looking toward the large confluence of support currently around the 1475 region and highlighted on the chart with the light blue circle. We have previous swing highs, the 50 Day SMA and a long term uptrend line. Would I personally go short here? No. I would look for a rally and then based on how that rally looks and what levels it starts from we can start to isolate key levels and places where a short might make sense….assuming a short could make sense at all. I am not throwing out that we could still see fresh new highs. Before you scoff, look at the beginning of last year’s grind higher as a reminder it can happen.
