After Hours: Short Opportunities In Amazon And JDA Software

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 |  Includes: AMZN, AVGO, JDAS
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.

DOWNSIDE MOVERS

Amazon.com (NASDAQ:AMZN) tumbled 8.7% lower to 177.45 in Tuesday's after hours session after missing Q4 sales expectations and setting its outlook in-line to below the Street view. AMZN touched an early after hours high of 200.48, but it was quick to swing back into the red and hit a session low of 172.64. It steadied between 180.83 and 174. A pre-market open Wednesday looks to have legs in the 180 to 175 range. We noted earlier on Tuesday that AMZN is a solid play on either side of the trade in its post-earnings action tonight, but it's the long side that sees the more consistent history of next-day outperformance following earnings-driven after hours trading. AMZN has been a steady session-to-session performers within our earnings database. The stock has compiled wider next-day closing levels in the regular session following 20 of its last 32 after hours earnings events - or 62% of the time. The near-term performance leans toward narrowing, doing so in six of the last quarters. Of note on these last six reversal moves - all but two have been recorded following an evening decline, a factor shorts should be wary of and where longs may want to consider that they may not be left out of the trade. Looking deeper into AMZN's data, it has seen an earnings-driven after hours decline in 21 of the 32 quarters we've tracked. In 12 of those 21 quarters (57%), the stock has added to its after hours declines in the following regular session. The consistent widening trend on the downside would have us looking at a short play on AMZN shares Wednesday morning. Early shorts may want to target potential entry points at the 181 to 178 area, levels that stood as a ceiling throughout much of Tuesday's after hours trade, and where there may be room to play downside drift back into the mid- to lower-170s.

JDA Software (NASDAQ:JDAS) declined 10% to 26.50 in night trading after topping Q4 expectations but also noting it received a notice from the SEC requesting information related to its accounting in past fiscal years. JDAS slumped to negative levels between 27.53 and a low of 25.77 and stayed in this area through the evening hours. A pre-bell open Wednesday may have potential surrounding the 26.50 area. JDAS is holding a long-term pattern of wider post-earnings share performance. The stock has seen more aggressive next-day play in 16 of the last 29 quarters we have tracked and in two near-term examples turned flat evening trading into a strong next-day gain. Looking deeper into the data, JDAS has recorded an earnings-driven after hours decline in 12 of the 29 quarters tracked and its follow-up performance is mixed, reversing seven times and widening in five events. The tentative reversal trend in JDAS would give us some pause on the short side Wednesday, but with a firm ceiling established Tuesday night at 27.50 to 27 we would still watch this area as a possible top that could see weakness back into the higher- to mid-26s.

UPSIDE MOVERS

Broadcom (BRCM) advanced 2.3% to 35.15 in Tuesday's after hours after topping Q4 estimates. BRCM firmed to plus-side levels between 34.80 and 35.50 and stayed tight to this area through much of Tuesday's after hours. A pre-bell open Wednesday may have potential near 34.80 to 35.20. BRCM has tended to favor reversal movement between the sessions, doing so 19 times and putting up wider share moves 11 times over the last eight years of quarters we've tracked. Looking deeper into the performance data, BRCM has seen an after hours gain in 16 of the 30 quarters we've tracked, and in 12 of those events, 66% of the time, the stock has seen its gain reverse direction or narrow in the following day's regular session. The reversal trend in place, both broadly as well as off evening gains, would initially have us looking at a prospective short play on BRCM shares through the early going Wednesday. Shorts may want to target potential entry points near 35.50 to 35.30, levels that stood as a ceiling through Tuesday's after hours trade.

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