Yesterday, we got into an Overnight Trade of the Day in New York & Co. (NWY) at 4.34. We are looking to sell this Trade right away this morning within minutes of opening. The company reported an EPS right in line with what analysts had been expecting, which was not exactly what I had expected. What is good news, though, is that headlines are playing up that NWY swung to a Q4 profit. Swinging to a profit is a very lucrative term, so we should be in business. The stock is not traded pre-market, so I have no idea where the market wants to take this, but I am thinking we should make some good money off the start of the day.
For today, I am looking at a perfect short sale for a market that may be ready for a bit of a pullback.
Short Sale of the Day: Steinmart Inc. (SMRT)
Analysis: Today, the market should be in store for a pullback. We have a number of indicators that have come out and are buzzing around that are not too great fundamentally for the market. First off, unemployment claims. While the number has decreased week-over-week for three straight weeks, unemployment claims missed target estimates by 2,000 and are still very high – only declining 5,000 from last week and sitting at 457,000. The chart below explains the dismal employment state further.
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Advance |
|
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|
Prior1 |
|
WEEK ENDING |
March 13 |
March 6 |
Change |
Feb. 27 |
Year |
|
Initial Claims (SA) |
457,000 |
462,000 |
-5,000 |
468,000 |
644,000 |
|
Initial Claims (NSA) |
432,166 |
460,249 |
-28,083 |
471,256 |
601,163 |
|
4-Wk Moving Average (SA) |
471,250 |
475,500 |
-4,250 |
470,500 |
650,000 |
Another issue the market is facing going into today is renewed issues with Greek debt. The country has once again commented on the need for more international assistance to help them with debt issues. Many European markets were down or are trading with very slight gains as a result of this news. Futures are up going into the day, but once some market buzz at the beginning of the day dies off, initial claims and a very toppy market should weigh on stocks.
In case it does not, however, I have selected a short sale that should do well either way. Steinmart, this morning, continued the retail trend with some really sexy earnings. The company reported an EPS beat 0.19 vs. 0.17 and beat revenue estimates by over 1%. The earnings, however, were not exceptional, and the stock is up over 7% in pre-market trading. Revenue was down 6% year-over-year.
The stock has moved up way too much on these earnings and even more so when looking at the technicals on short term. The stock was majorly overbought going into earnings, and the stock had priced in earnings, increasing 25% in two weeks. SMRT was right at its upper bollinger band, and the 7% increase has skyrocketed the stock. Now, it is in the middle of a breakout with expanding bands, but it really cannot maintain that sort of gains. Profit taking is going to occur.
I have adjusted earnings to allow for even more gains, especially since futures are up slightly. I think this one will get a small pop and die off.
Entry: We are looking for an entry at 10.35 – 10.45.
Exit: We are looking to cover for a 2-3% gain.
Stop Buy: 3% on top of entry.
Good Investing,
David Ristau
