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Two Post-Earnings Stocks for December: AMBA and ROST




In these tense weeks on Wall Street, where on one hand we have the indexes in all-time highs, and on the other a series of fundamental problems (Trade War with no-solution yet, global economic slowdown, possible recession in 2020, negative interest rates, investment of the yield curve, etc.), an attractive investment to refine the short-term side of your portfolio is to observe stocks with good recent earning reports positive ratings from the analysts but, for "strange" reasons (of course, market manipulation from smart-money), their shares can't get a trend, keeping up the expectation to go up.

As I commented earlier, buy and hold a stock before its earnings report is a bet: can be highly profitable or devastating for your portfolio. You decide the risk you face.  Personally, I always prefer to wait for the report, to compare their numbers with the estimates in eps, sales, and guidance, review the conference call for some additional data and see the analyst's actions the next day, which usually increases or decrease their weighting and price target. I search for the stocks that beat estimates but didn't react well. I wait for its behavior in the next days, in which high-volume transactions and implied volatility move, ideal factors for trading, are guaranteed. It is not an infallible method (there is none in stock trading), but for one who handles low-risk management, it is the most advisable.

Two stocks that recently reported earnings, are taking my attention, due to its price action: the semiconductor design company Ambarella AMBA, and the retail stores Ross Stores ROST.


1. Ambarella Inc. AMBA, $55.205


Click to enlarge.


Fundamentals:

Ambarella 2020 Q3 ER highlights, was better than forecasts: EPS $0.32 beats $0.20 estimate, above $0.21 a year ago. Sales $67.9M beat $65.03 estimate, an 18.6% increase year over year. Guidance Q4 sees sales $55-59M, inline. The company "envisions automotive and security to be down sequentially while other revenues to be flat to slightly up sequentially. It predicts consumer electronics revenues to be persistently soft, declining as a percentage of revenues over the next two to three years".  For sure, a Trade War resolution could send this stock again to $80 levels, as in 2017.

The stock's initial reaction in extended hours was a 7% spike to $63.5 highs. After Conference Call, from CEO and founder Fermi Wang, shares decrease slightly to $54 when closes the next regular session on Tuesday. Also, volatility closes in 34% from 56% before the earnings report. Next day, analyst publishes its ratings and price target, and, as you see, with no upgrades but a generally positive view for AMBA, as all of them raised its price target

- Morgan Stanley: maintains Overweight rating. Price Target. $60 > $61
- Roth Capital: maintains Neutral rating. Price target: $55 > $60
- Craig-Hallum: Reiterates Buy rating. Price target: $62 > $70
- Deutsche Bank: maintains Overweight rating. Price Target. $50 > $55
- Stifel Nicolaus: maintains Hold rating. Price target: $54 > $55
- Bank of America: maintains Underperforming rating.  Price Target. $50 > $53


Technicals:

With shares ranging since October, Ambarella needs more signals for a bullish bias, as overcome the Ichimoku cloud, its SMA50 and 100 averages and the November month pivot at $55.31. Stochastic at lows is a good signal for a buy-the-dip trade. I presume a slow recovery, ideal for speculation, could begin next week if the technicals mentioned above are achieved.






2. Ross Stores ROST, $ 116.33


Click to enlarge.


Fundamentals:

Session post-earnings open at lows $109 but thanks volume increasing during the day, shares finally close at $111 and next day a slow but firmly bullish rally was seen, sending the stock to $116.33 at the close.

Ross Stores 2020 Q3 ER was, as usual, better than forecasts, as the company always gives low guidance: EPS $1.03 beats $0.97 estimate, above $0.91 a year ago. Sales $3.85B beat $3.77B estimate. Also, show increases in comparable-stores sales (5%) and operating margin (12.4%), both above-plan, and expecting a nice $1.25 for the next quarter, as told its CEO Barbara Rentler in the Conference Call. Good numbers, confirm with the many analyst rating:

- Wells Fargo: maintains Outperform rating. Price Target. $116 > $125
- Wedbush: maintains a Neutral rating. Price target: $110 > $115
- Nomura: Reiterates Neutral rating. Price target: $110 > $113
- Deutsche Bank: maintains Buy rating. Price Target. $118 > $120
- Morgan Stanley: maintains an Overweight rating. Price target: $104 > $113
- Bernstein: maintains Outperform rating. Price Target. $118 > $125


Technicals:

ROST is moving in a powerful bullish channel since March, above main moving averages and Ichimoku cloud. With the current  ER is likely this rally will continue in the mid-term. As it is now trading at all-time highs, a good idea is to verify when it reaches its next resistance is in the upper line of the channel, at $118.40. With volatility at year lows (20%) a good opportunity is seen here for trade calls ITM or bullish spreads in this, now oversold, stock when a little pullback from highs occurs, likely next week.



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Breakout Sectors for next X'mas Rally (if happens...)




It all depends on Trump-Xi decisions in the next weeks. Let's check some popular sectors with its shares near to make a breakout:

1. Semiconductors ETF SOXX, $234.74



Since May, the popular Semiconductors sector (really a subsector, not properly a GICS sector), followed by the ETF SOXX, was ranging forming an ascending triangle with a strong resistance that finally breakouts last week at $221.40. And was a successful breakout as you verify its daily chart, with its three phases clearly distinguish: action, reaction, and resolution, all of them with its volume requirements. Technically, its shares may begin to rise, despite being in all-time-highs, as all technicals signals are very bullish now. Shares are above the three main SMA averages, above the Ichimoku cloud and its pivot line at $219.26.
But be careful with two details: as usual, the Trade War developments (a bad or no agreement will be devastating for Wall Street), and next Qualcomm QCOM and Nvidia NVDA earnings, two giants of this sector that could reverse the chart if its reports don't satisfy investors. I wait for a little pullback, due the stock is overbought now, and then enter long.



2. Biotechnology sector XBI, $83.14



The biotechs, follow by the popular ETF XBI, seems to be a great bet for these months. Now trading at the same levels of November 2018. Since April its shares were trading in a bearish downtrend channel as shown. Finally, last week overcome the key SMA200 average, and the upper channel line, but needs to retest it or could be a false breakout. On my radar: there is a long bullish road to go here for this industry.



3. Russell 2000 Index ETF IWM, $159.15



Not properly a sector, but an index, the small caps stocks are followed by the Russell 2000 index and its  ETF IWM, and of course the popular, and very volatile, ETFs TNA and TZA. Technically, its daily chart shows the same patterns as the XBI chart above: a bearish downtrend channel, with a recent breakout of the upper channel that needs to be confirmed in these days. Also, this ETF is on my radar, waiting for a long trade. If Trump and Xi decide to finish their war, the sky is the limit for all the markets and especially for this index.


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My Stock Watchlist for November-December 2019



November- December 2019


On my Thinkorswim trading platform, I manage several watchlists, differentiating them according to the instruments it contains. There are stocks, futures, ETFs, sectors, and indices.

My different ETFs watchlists (not shown below) usually keep the same symbols in time, diversified by sectors, industries, countries, commodities, both at 1X normal speed and 3X triple speed, combining long and short positions. My indexes, sectors, and futures watchlists (also not shown) are also fixed, covering the main index and commodities in Wall Street and major foreign exchanges, the usual managed by all traders.

Those that do change, usually weekly, are the symbols of my Main watchlist, shown below, 18 stocks which I follow on a daily basis, due to my own research, that consider both fundamental and technical analysis, news topics or popularity. Over time, it appears in the list a new stock, disappear other, according to the importance they are acquiring, in my opinion.





Keep in mind, it's a watchlist (longs and shorts), not a "Buy" Lists. My suggestions, charts, and ideas regarding these stocks, in which I'm long, short or neutral, I do in the blog posts. And more fresh data and news in my daily tweets through Twitter or StockTwits, which are much more friendly and dynamic platforms for a chat and get feedback from traders.



Image was taken on November 3rd, 14:22 EST.
Favorite 18 stocks that I'm following during November-December 2019.
Important notes: https://www.xgreedandfear.com/p/disclaimer.html


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