Another week of slight bullishness is in store. While the market appears overbought, there are no events over the next week that will be significant enough for a pullback. From a seasonal perspective, the market does well over the next week, especially computer tech. If you’re thinking of long trades in this sector, look through the XCI index for stocks you like or just outright buy IYW.
As for earnings next week, there are a number of interesting plays. Here a summary:
TLRD: Until recently, the directional drift here was down. We now see it shoot up again, implying that many are preparing long positions for earnings. An analysis on TLRD’s past earnings patterns shows an 83% probability of a rally.
In addition, the play is convex. While the stock is rather fairly valued from a future cash flow perspective, it’s a beaten-down, non-glamor stock, the type of stock that tends to rally on an earnings surprise. We also have considerable insider action in the last three months, with most of the money being on the long side.
FNSR: The market doesn’t really seem to have an opinion on this one. The earnings pattern isn’t very strong and nor is the monthly seasonality. But they are both positive and statistically significant; coalescing the data gives a pretty strong probability of a rally.
This stock is rather easy to predict: Most of the time, a beat implies a rally; a miss implies a selloff. If you have time, dig into the fundamentals and see if the expected EPS matches the EPS trend. The technicals give a strong enough bullish thesis to go long here.
GMS: This one hasn’t been around long enough to get a good idea of the chart. If you’re looking for something safe, this is not your ticker. If you’re looking for an adventure on an stock with mixed valuations, this is it.
However, no one is trading options on this one. If you want to play, you have to outright short the stock, which is often dangerous. We might be at an impasse where the stock will begin to pull back after the gap and after investors realize that the debt and equity of the company have converged – and not in a good way.
KB: There is a strong earnings track record here, for the long side. However, March tends to be a poor month for KB. Thus, we have conflicting data here.
The stock might be slightly undervalued, so if if a side has to be taken, the long side might be the better choice. It might be smart to focus on a short volatility strategy above all else.