I can’t believe it is Thursday already. The week is flying, and we are having a good one. Yesterday, we got into an Overnight Trade on Tech Data (TECD). This morning things are looking positive for the company. TECD hit an EPS of 0.82 vs. the expected 0.78. No pre-market movement, so we will see where it opens. Headlines look positive, though. On the bad side, unemployment claims came out higher than expected and reentered the 500,000 range. That is definitely not good for the economy in general, and it will probably be tough for the market to be able to sustain many gains today with that news.
Well upon the request of one of our peers, I am working on a solid short sale…
Short Sale of the Day: PetSmart Inc. (PETM)
Analysis: Things were looking pretty positive this morning with a good round of earnings, but then initial jobless claims came out much higher than expected, hitting 500,000 claims while estimates were at 475,000. The market turned to a loss, but it has recovered back to neutral. I, unfortunately, think this may be a bit of a fake out and am expecting that the market will not be able to sustain gains. Therefore, a short sale seems appropriate while I am much more afraid of a Buy Pick.
Therefore, we want to find something that can move down with the market and even if the market stays neutral or has a bit of gains. One such stock is PetSmart Inc. (PETM). The company operates over 1,000 pet stores throughout the USA and is a favorite for dogs, cats, and more. The company reported strong earnings with a 24% jump in earnings, hitting an EPS of 0.41 vs. the expected 0.36. The company forecasted well moving forward as well and is expecting strong results for the full year. This helped send the stock skyrocketing in pre-market up close to 9%.
The stock in the mid-32s is great, and things look positive long term; however, the stock has jumped almost 9%. The stock’s upper band starts in the mid to upper-32s, and I would expect it start to feel some definite resistance as it tests 33. We have given the stock some definite cushion to start the day. This short sale is strictly a technical one that shows the stock cannot keep its momentum much higher because seller demand will start to rise. The stock will move into overvaluation, and traders will be looking to get out of this one.
We want to be watching very carefully at the open. If it does not make the range I have set and starts dipping earlier, we want to be ready to pull the trigger. However, I am pretty confident in the range we have set.
Good luck!
Entry: We are looking to short at 32.85 – 33.20.
Exit: We are looking to exit for a 2-3% gain.
Stop Loss: 3% on top.
Good Investing,
David Ristau
