After Hours: Testing the Short Side of Activision, MEMC and Entropic

by: Midnight Trader

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

Upside Movers

Activision Blizzard (NASDAQ:ATVI) gained 2.5% to 12.11 in Wednesday's night trading on the back of better-than-expected Q2 results. ATVI dipped to an early after hours low of 11.40 before reversing course and rising to a session high of 12.50. It steadied between 12.22 and 12.40 into the late first-half and mid-session before gradually losing a good portion of its gains into the second half, slipping from 12.30 to 11.88. A pre-market open Thursday may have potential near the 11.85 to 12.05 area. ATVI has recorded an earnings-driven after hours gain in six of the last 11 quarters tracked in our database. Also, 66.7% of the time (four out of six times) the stock followed-through in the same direction by the close of the next day's regular session compared to the extended hours "effective close." When it followed-through, the price closed further in the same direction on average by 2.5% (in four events) from the effective close. While the historical data looks promising for the long side of ATVI, we would be cautious on the upside trade, and perhaps ponder a short bet on the shares, especially in light of some of the late weakness recorded in the second-half of Wednesday's after hours. Shorts may want to sit close to the 12.50 to 12.30 range, an area that settled as a hard ceiling through the first-half of night trading. On the long side, buyers may want to nibble at the shares near 11.85 to 12, a possible near-term floor support that could see bumps back into the lower 12s.

MEMC Electronic Materials (WFR) advanced 1.7% to 7.11 in Wednesday's after hours action after topping Q2 estimates. WFR was an aggressive upside mover at the start of Wednesday's after hours, popping to plus-side levels between 7.38 and a session high of 7.82. It steadied near 7.48 to 7.77 through the first-half before seeing sharp weakness into the second-half, dropping from 7.50 to 6.96. It firmed near 7.01 to 7.20 deeper into the evening. After hours indications would suggest WFR records a pre-market open Thursday near 7.10 to 7.30. In the data we have collected on WFR, the stock is mixed, adding to its after hours direction between the sessions in 11 of 22 quarters. Near term, the stock is mixed, with two widening and two narrowing events in the last four quarters. Looking deeper into the performance data, WFR has recorded an earnings-driven after hours gain in 11 quarters we've tracked, reversing direction or narrowing its gains in next-day regular session trading in eight of those events, or 73% of the time. The reversal pattern in place on WFR, combined with some late-session selling in the shares, would have us initially targeting a possible short play on the stock Thursday. Shorts may want to linger near the 7.70 to 7.30 area, a range where a potential near-term top could form and perhaps see weakness back into the lower 7s. On the long side, buyers may be able to accumulate shares near 7.00 to 7.10, an area where the stock could see opening support and perhaps firm back up toward 7.20.

Downside Movers

Entropic Communications (NASDAQ:ENTR) cratered 21.5% to 5.24 in Wednesday's after hours trading after missing Q2 expectations. ENTR dropped to the 6.00 mark through the first-half of night trading before setting off on an aggressive downside run that took it to negative levels between 5.46 and a low of 4.75 - a range where it stayed through the bulk of its after hours action. A pre-market open Thursday looks to have potential near the 5.20 to 5.00 range. There was some moderate upside support Wednesday night off the low of 4.75 up to 5.00, levels more risk tolerant long traders may want to watch as a potential near-term floor support. Shorts may see opportunities to play the issue off any return to the 5.46 to 5.30 area, a range where sell momentum was most aggressive in after hours trading before the stock broke to its lows south of 5.00. However, it's likely ENTR starts Thursday closer to 5.00, so more risk tolerant shorts may want to sit near the 5.30 to 5.20 area in anticipation of this range setting up as a near-term top and perhaps again sliding into the low-5s to high-4s.

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