After Hours: Testing the Short Side on Apple, Yahoo and Chipotle

Includes: AAPL, CMG, YHOO
by: Midnight Trader

Below is a brief recap on each of the top-volume, news-driven movers in Tuesday's after-hours, taking a look at specific stocks' after-hours movement and how that trade may offer insight into potential floor supports, ceilings and trading ranges that could develop in Wednesday's pre-market and early regular session.


Apple (NASDAQ:AAPL) gained 5.2% at 396.70 in Tuesday's after-hours trade after topping Q3 estimates and setting its Q4 outlook below the Street view. AAPL was released from an after-hours trading halt and spiked straight to its session high of 405. Sellers hammered at the issue off the top, driving it down as low as 395.68 before it stabilized close to 397. A pre-market open Wednesday may have potential near the 395 to 400 area. AAPL has recorded an earnings-driven after-hours gain in 22 of the 31 quarters tracked in our database. The stock added to its after-hours upside in next-day action nine times, reversed direction 12 times, and once remained even with its after hours move. AAPL's tendency to cut its evening upside in next-day trading, combined with some rather aggressive downside liquidity that developed tonight at 400 and above, may open the door for more risk tolerant shorts to test the waters in the shares on Wednesday. Shorts may want to target a possible ceiling at 405 to 400. We would be cautious on the short side, however, and perhaps move to the sidelines through the early going as we suspect morning traders may make a run at testing that 400 top if Wall Street analysts dish out some supportive commentary on the shares ahead of the bell tomorrow. On the long side, buyers may want to watch for a potential floor support to develop in the lower 390s, or into the high 380s.


Yahoo (NASDAQ:YHOO) declined 1% to 14.44 in Tuesday's evening trade after posting Q2 sales results below estimates and setting its Q3 view mostly south of the Street. YHOO slumped to an early after-hours low of 13.90 before edging up to still downside levels between 14.40 and 14.14 - a range where the issue stayed through the bulk of its evening action. A pre-market open Wednesday may have potential in the 14.40 to 14.30 range. YHOO has seen an after-hours decline in 12 of the 28 earnings-driven after-hours moves we've tracked, and eight times, or 67% of the time, followed that trade with a more-aggressive decline in the next day's regular session. The consistent widening trend in place on the downside, combined with a steady top tonight at 14.40 to 14.30 may offer more risk tolerant shorts an opportunity to test what could be some modest downside from these levels Wednesday morning. We should note that there was some decent buy liquidity that held YHOO up near 14.40 to 14.30 late in Tuesday's after-hours, a support level that could hold through the early-going Wednesday.

Chipotle Mexican Grill (NYSE:CMG) declined 4.1% to 320 in evening trading after posting mixed Q2 results. CMG tumbled to an early after-hours low of 311.14 before bouncing back to about 325.05. The stock maintained a narrow negative range of 324 to 317.11 through the rest of its evening action. A pre-bell open Wednesday looks to have potential in the 322.50 to 319 range. CMG has widened its earnings-driven after-hours trade in next-day regular session play in seven of 13 quarters and more recently, over the past year, has widened its move between the sessions in three of the last four quarters. We noted earlier today that shorts may be sidelined until CMG finds a clear direction in after-hours trading as the stock has a tendency to see its earnings-driven evening declines reverse direction. The stock has declined five times in reaction to earnings over the 13 quarters for which we have data. It has reversed that move three times, or 60% of the time. Despite the reversal pattern in place in CMG shares, we're inclined to test the downside at the start on Wednesday as sellers established a decent top at 325 to 322, a potential ceiling level that shorts may be able to ride back into the 320 to 316 area.

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