After Hours: Going Long on Cree and Demand Media, Shorting Motricity

Includes: CREE, LFGR, VLTC
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.


Cree (NASDAQ:CREE) advanced 9.3% to 32.24 in after hours trading Tuesday night after beating Q4 expectations and issuing mixed guidance for Q1. CREE dropped to an early after hours low of 27.54 before setting off on an upside run that took it from 28.72 to 30.90. It traded near 30 to 30.50 into the mid-session and hopped to new highs in the second-half, moving between 30.65 and a top of 32.60. Evening indications would suggest CREE records a potential pre-market open Wednesday near the 31.50 to 32.20 area. CREE has recorded an earnings-driven after hours gain in six of the last 11 quarters tracked in our database. Also, 83.3% of the time (five 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 6.3% (in five events) from the effective close. CREE's strong tendency to add to evening gains in next-day trade, combined with some solid upside support posted Tuesday night, would have us looking at a potential long play on the shares Wednesday morning. Early longs may want to target possible entry points near 31.50 to 32, a late evening base support that could set up as an early day floor as the stock perhaps attempts to break more aggressively north of 32. Less risk tolerant longs may want to bring the entry down closer to 30 to 30.50, levels that could form as a bottom support if the stock should weaken off its extended-hours highs.

Demand Media (DMD) leaped 17% higher to 10.51 in Tuesday's night trading on the back of better-than-expected Q2 results and the extension of an advertising pact with Google (NASDAQ:GOOG). DMD saw a brief drop to 8.67 early in night trading before firming to plus-side levels between 9.26 and 10. More aggressive buying hit the issue after the company disclosed an extension of its advertising pact with Google, boosting the stock to gains between 10.50 and 10.75. A pre-bell open Wednesday may have potential near 10.40 to 10.60. Buy momentum looked most supportive Tuesday night between 10 and 10.50, an early-day floor support longs may want to watch - levels that could see pops back into the higher-10s.


Motricity (MOTR) cratered 55% to 2.04 in Tuesday's after hours trading after missing Q2 estimates and setting its Q3 revenue guidance below Street expectations. MOTR was released from an after hours trading halt and plummeted to its session low of 1.90 before stabilizing between 2.20 and 1.93 through the bulk of its evening action. A pre-bell open Wednesday morning may have legs surrounding the 2.00 mark. We've tracked MOTR in only two recent quarters in our database. In both events, the stock declined in after hours trading and followed those moves with deeper drops south in the following day's regular session. This is limited historical data, but when considering some of the heavy downside liquidity that touched the issue Tuesday night, it helps the case for aggressive shorts. Shorts may want to watch for possible entry points near the 2.30 to 2.20 range, levels that recorded some of the most vigorous downside volume in Tuesday's after hours and where a possible near-term ceiling level could form for possible downside retests of the 2.00 area.

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