Shorts Should Be Wary of Veeco's Downside Move

| About: Veeco Instruments (VECO)

Veeco Instruments (NASDAQ:VECO) was down about 3.5% at 43.64 in Monday's after-hours, punched lower after the company came in shy on Q4 revenue, beat on earnings, and set its guidance below the Street view.

While the downside may look tempting for shorts, the stock's after-hours trade, combined with a historical tendency to reverse its evening trade in next-day action, would have us wary of going all in on a short side play in the shares. In fact, this may be a stock for more risk tolerant longs to test the waters.

In Monday's after-hours trade, VECO cratered to an early evening low of 40.25 before setting off on a session-long upside run that took it from 40.80 to a late high of 44.30, an area where it was still modestly in the red. It dropped back to about 43.78 to 43.20 late in the session.

Evening indications would suggest VECO records a potential pre-market open Tuesday near 44 to 43.

VECO has recorded an earnings-driven after-hours decline in two of the last 12 quarters tracked in our MT Pro database. 100.0% of the time (2 out of 2 times) the stock reversed in the opposite direction by the close of the next day's regular session compared to the Extended Hours "effective close". When it reversed, the price closed in the opposite direction on average by 6.1% (in 2 events) from the "effective close".

While the downside historical data isn't overly predictive, last night's rather aggressive surge off the early lows would at least have us looking at a potential long play in the shares early on Tuesday. Longs may want to watch for any drift back near the 41.50 to 42.50 area, levels where buyers pushed into the shares with some urgency last night and where there may be room to catch some upside bumps back toward 43 or above. More risk tolerant longs may want to sit closer to the 43 to 43.50 range, an area likely to see early day interest tomorrow and perhaps set up as a tentative floor support for possible pops back near 44.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.