Thinking about a pre-earnings trade? Look at Applied Optoelectronics (AAOI). (April 24, 2017)
AAOI
Lets look today at Applied Optoelectronics, AAOI ( NASDAQ:AAOI ). This has been a big mover for a while. The pattern is a little bit choppy now, but lets get a kind of perspective here. First we will go out to the weekly chart. You can see the kind of move this thing has had from mid 2016 it essentially went parabolic, up almost 650 percent, and now it is all the way back to $40.00. Wow! That doesn’t look like much of a pullback. However, when you look at it this way it is about a third of the market cap, 33 percent.
Lets get a little perspective on this. The company doesn’t report earnings for another 10 days or so, right? I don’ t like the way this is trading here. This kind of smacks of a top. A really nice move, right to $60.00; the absolute high, $60.19. Some guy bought that and then now it hasn’t even come anywhere close to it.
Here is the thing: I have just got a couple levels here. The first level is a fourth of the float is short. Almost 25 percent of the float is short and that is kind of a big deal, that can matter. So if the company reports pretty solid earnings, earnings that surprise the market. And the market, by the way, is going to be expecting a lot after running, just during this first quarter, over a double the market is going to be expecting a lot. If you get a breakout above $60.00 this is probably going to run quite a bit further just on the short covering.
On the other hand though, $40.00 is support, not too far below where the stock is here. If this stock trades down below 40.00, it can probably lose another 25 percent down to 30.00 without too much difficulty. The long and the short of it is, this is going to be a really dicey stock on May 4th. Between now and then, seriously, it is a trading stock. You don’t build a position in it. You don’t slowly take a position one way or another, certainly you can do that.
What I am saying is, between now and earnings, this is a stock that could go up with the market, it could go up 15-20 percent for crying out loud. Or it could fall. I like the fact that semi’s were up today, this is up 7 percent, so advantage bulls on this. Just make sure that if you are trading this trend you understand that come May 4th, when they report earnings, this can be a whole different stock. So trade it either before, between now and then, or wait until after then, and then make your trade.
Free Chart