After Hours: Short on Cisco and Open Text, Long on Advance Auto Parts

Includes: AAP, CSCO, OTEX
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.


Cisco (NASDAQ:CSCO) soared 7% at 14.70 in Wednesday's after hours trading after topping Q4 expectations and setting its Q1 revenue growth guidance in a range that straddled the Street view. CSCO held mostly upside levels between 13.74 and 14.40 through the first-half of after hours trading. Buyers were aggressive moving into the second-half as in-line revenue guidance off the company's conference call goosed the issue from 14.13 to a session high of 15.49. It dropped from 15.40 to 14.65 deeper into the second-half of night play. A pre-market open Thursday looks to have potential near the 14.60 to 14.90 range. CSCO demonstrates a mixed session-to-session performance on earnings announcements, posting wider next-day closing levels following 18 out of its last 32 extended-hours earnings events. In the near-term, the stock has moved to favoring a widening trend, adding to its earnings-driven after hours moves in the next day's regular session in the last five consecutive quarters. Looking deeper into the performance data, CSCO favors reversing direction between the sessions following after hours gains, recording 12 earnings-driven upside evening moves in the 32 quarters we've followed - widening those gains four times the next day and recording eight other events where the gains were cut back or reversed the following day. The tendency to see its gains slim down or evaporate in next-day action would have us looking at playing a potential short trade on CSCO Thursday morning. Shorts may want to watch the 15.40 to 14.90 area to start on Thursday, an area that could set up as a near-term ceiling level and perhaps see some downside drift back into the mid- to lower-14s.

Advance Auto Parts (NYSE:AAP) gained 3.7% at 52 in Wednesday's evening action after beating Q2 earnings estimates. AAP vaulted to an early after hours high of 53.07 before settling between 51 and 52.31 through the bulk of its evening action. A pre-market open Thursday looks to have potential surrounding the 52 mark. AAP has recorded an earnings-driven after hours gain in four of the last 10 quarters tracked in our database. Also, 75.0% of the time (three out of four 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 3.4% (in three events) from the effective close. The combination of some decent near-term historical data on the upside and some steady, if lighter-volume, buy support would have us looking at a potential long play on AAP shares Thursday. Longs may want to test the waters near 51.25 to 52, levels that saw consistent upside support and where a potential floor support could develop for bumps back into the mid-52s.


Open Text (NASDAQ:OTEX) declined 7.5% to 53.13 in Wednesday's after hours after posting Q4 earnings below expectations. OTEX slumped to an early after hours low of 52.51 before settling between 53.49 and 52.65 through the rest of night play. A pre-bell open Thursday may have potential surrounding the 52.75 mark. There was a mixed bag of volume at the top end of tonight's trading, between 55 and 53.49. Buyers were active at 53.49 and just below, but their efforts didn't pan out. As a result, we would be watching that 55 to 53.49 range as a potential ceiling level for shorts that could see downside drift back into the lower 53s or high- to mid-52s.

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