Dell May Take the Street by Surprise … Again
by Jon Lewis 11/12/09
Free Trading Guides
Tech will have its day in the sun Thursday Nov. 19, when Dell (DELL) reports after the close. I'm seeing a couple of things to like about Dell heading into earnings, the first being the stock's chart.
In the past week, the shares have rebounded smartly off their 100-day moving average to overtake the 20-day and 50-day trendlines.
Up next is potential multi-top resistance at the $16 level (also the site of the formidable 100-week moving average and some heavy November call open interest), and then the 52-week high at $17 reached in September.
Skepticism among analysts could also work in Dell's favor.
Currently, just 40% (12 of 30) covering analysts rate the stock a "buy," which leaves plenty of room for upgrades.
The other factor to take note of is the stock's performance following recent earnings reports.
During the past four quarters, DELL has topped the consensus earnings forecast by an average of 11%. The Street has turned these upside surprises into positive momentum, boosting the share price by an average of 11% within the two weeks following earnings.
I like the setup for DELL headed into earnings. But I'm also watching the $16 level. If it gets taken out before Thursday, I'd be much more comfortable playing a pre-earnings call.
Trade Options to Get Richer, Quicker! There has never been a more exciting time to be an options trader. And now, you can get the option information you need, FREE each week. Sign up for your free subscription to Chris Johnson and Jon Lewis' Market Edge newsletter today!
More By This Expert
Take a Gamble on This Earnings Play
Casinos have been a hot item lately, and gaming supply company Shuffle Master (SHFL) could pack a strong earnings punch next week.
Next week should be a slow trading week, which means that stock prices could be more volatile than usual, especially if a company surprises or disappoints with earnings -- I have one of each for you.
Buy Calls on This Earnings Loser
This stock missed earnings estimates in three of the past four quarters, yet made double-digit gains in the weeks following. And it's about to announce earnings again.
Put Your Money Where Your Mouth Is
Despite the economic slowdown, consumers continue to purchase peanut butter, jelly and all other J.M. Smucker (SJM) products, and the stock may see a big move after earnings next week.
