After-Hours: Going Long on Baidu, Shorting Broadcom and Netflix

|
 |  Includes: AVGO, BIDU, NFLX
by: Midnight Trader

Below is a brief recap on each of the top-volume, news-driven movers in Monday's after-hours session, 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 Tuesday's pre-market and early regular session.

UPSIDE MOVERS

Baidu (NASDAQ:BIDU) advanced 6.7% at $167.06 in Monday's after-hours session after topping Q2 estimates. BIDU leaped to an after-hours high of $170.51 off the company's earnings announcement. It saw some decent sell pressure roll in off the top, dropping BIDU back to about $163.82. Buyers looked confident off the $163.82 level up to levels up to about $168.40 as trade progressed into the second-half of Monday's after-hours. A pre-bell open Tuesday may have potential near $166 to $168. BIDU has recorded an earnings-driven after-hours gain in 15 of the 22 quarters tracked in our database. In eight of those quarters, or 53% of the time, the stock has moved further into the green in the follow-on regular session. The upside historical data on BIDU isn't spectacular in terms of consistency, but we did gain some confidence in the shares Monday as buyers pushed in strong buying in the second-half of night trade. Early longs Tuesday may want to look at potential entry points near $164 to $166, levels that could settle as a near-term floor support as the stock perhaps makes another run at $168 or higher.

Broadcom (BRCM) surged 7.8% to $37.65 in Monday's after-hours trade after the company beat Q2 estimates and set its Q3 revenue guidance in a range that straddles the Street view. BRCM jumped through the $37 mark to a first-half after-hours high of $38.90. Sellers were aggressive off the top, driving BRCM down to still positive levels between $37.80 and $38.30 before the shares weakened a bit more into the second-half - maintaining a range of $37.50 to $37.81. Evening indications would suggest BRCM records a potential pre-market open Tuesday surrounding the $37.50 area. BRCM has tended to favor reversal movement between the sessions, doing so 18 times and putting up wider share moves 10 times over the last seven years of quarters we've tracked. Looking deeper into the performance data, BRCM has seen an after-hours gain in 15 of the 28 quarters we've tracked, and in 12 of those events, 80% of the time, the stock has seen its gain reverse direction or narrow in the following day's regular session. The combination of some consistent sell momentum recorded Monday night off the session highs and a strong history of reversing earnings-driven after-hours gains in next-day action would have us looking at a potential short play in BRCM shares on Tuesday. Early shorts may want to target the $38.90 to $38 range as a possible entry range as sell momentum was strong in this area throughout after-hours action.

DOWNSIDE MOVERS

Netflix (NASDAQ:NFLX) was hammered 9.4% lower at $255 in Monday's after-hours action after missing Q2 revenue estimates and setting its Q3 guidance below expectations. NFLX cratered straight to its after-hours low of $248.90 in the immediate wake of the company's quarterly report. It firmed to still negative levels between $265.95 and $253.44 before tightening its downside to between $260.24 and $252.02. A pre-market open Tuesday may have potential near $257 to $252. We noted earlier Monday that NFLX is showing a long-term tendency to widen its post-earnings share move between the sessions, doing so in 21 of the last 30 quarters for which we've tracked results (70% of the time). The near-term performance favors widening, seeing more-aggressive, same-direction trade in the following regular session in the last six quarters. Looking deeper into the performance data, NFLX has recorded an after-hours decline in 16 quarters, adding to its evening declines in next-day trade in 13 quarters (81% of the time). The strong historical trend in place on the downside would have us looking at an aggressive short play in NFLX shares early Tuesday. Shorts may want to target potential entry points in the $265 to $255 area, levels that stood as a ceiling range through Monday's after-hours action.

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