After Hours: Playing Cisco Long After Earnings

Includes: CSCO, GMCR, PEGA
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 Systems (NASDAQ:CSCO) advanced 3.8% to 18.29 in Wednesday's after hours trading after beating Q1 expectations and setting its Q2 earnings view in-line to above the Street consensus. CSCO popped to an early after-hours high of 18.36 before sliding back to the flatline at 17.61. It spent the rest of the evening firming from even to upside levels between 18 and a high of 18.46. A pre-market open Thursday looks to have legs near 18.20 to 18.40. The stock demonstrates a mixed session-to-session performance on earnings announcements, posting wider next-day closing levels following 19 out of its last 33 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 six consecutive quarters. Looking deeper into the performance data, CSCO favors reversing direction between the sessions following an earnings-driven after hours gain, recording 13 earnings-driven upside evening moves in the 33 quarters we've followed - widening those gains five times the next day and recording eight other events where the gains were cut back or reversed the following day. While the upside historical data may not be overly bullish for longs, we would note that the stock has been exceptionally consistent over the last year-and-a-half, typically building on evening moves in next-day action and demonstrating a volatility that could reward early longs. With that in mind, we would look to play upside entry points between 18 and 18.30, a potential near-term base support that could see lift back into the mid-18s.


Green Mountain Coffee (NASDAQ:GMCR) plummeted 33.1% to 44.80 in Wednesday's evening trading after missing Q4 expectations and setting mixed guidance. GMCR cratered to an early evening low of 45 before buyers flooded into the shares and drove it as high as 52.68. This support abandoned the shares quickly and GMCR spent the bulk of its after hours action sliding from 51.60 to a late low of 44.56. It steadied just above 45 deeper into the second-half of night trading. A pre-bell open Thursday may have potential near the 46.20 to 45 range. GMCR has recorded an earnings-driven after hours decline in three of the last nine quarters tracked in our database. Also, 66.7% of the time (2 out of 3 times) the stock reversed in the opposite direction by the close of the next day's regular session compared to the extended hours "effective close." When it reversed, the price closed in the opposite direction on average by 4.8% (in 2 events) from the effective close. While the tendency to narrow its evening declines within the limited data we have may bode well for longs, we would still lean toward the short side - as selling was strong throughout Wednesday's evening action. Early shorts may want to target a possible ceiling level at 47.50 to 46, an area that settled as a ceiling late in Wednesday's after hours action.

Pegasystems (NASDAQ:PEGA) declined 19% to 30 in Wednesday's after hours after missing Q3 expectations and issuing revenue guidance below the Street view. PEGA dropped from 37.04 to 31.63 through the late first-half of night trade. It slipped to lower levels into the mid-session and second-half of the evening, trading between 31.45 and a low of 29.50. A pre-market open Thursday looks to have potential in a range surrounding the 30 mark. Buyers were attempting to establish a floor late Wednesday night at the 29.50 to 30 area. As a result, shorts may want to watch for any return to the 32 level, a mark that saw strong downside momentum before the stock dropped to its lows. More risk tolerant shorts may want to sit closer to the 31.45 to 30.45 range, levels that are more likely to see early day play Thursday as the stock looks to have legs to start morning trade close to 30.

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