After Hours: Playing Brocade And Dycom Long, Shorting HP

Includes: BRCD, DY, HPQ
by: Midnight Trader

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


Brocade (NASDAQ:BRCD) advanced 5.5% at 4.73 in Monday's after hours trading after posting better-than-expected Q4 results. BRCD popped from the 4.48 mark to an early after hours high of 4.87. It fell back to about 4.51 before settling between 4.67 and 4.77 through the bulk of its evening action. A pre-market open Tuesday looks to have legs near 4.65 to 4.75. BRCD just favors more aggressive next-day same-direction trading than a reversal pattern over the last nine years. The stock has added to its extended-hours performance in next-day regular session trade in 20 of its last 34 earnings events and narrowed or reversed in the other 14. In the near-term, the stock favors widening its share move between the sessions, doing so in seven of the last eight quarters. Looking deeper into the performance data, BRCD is about evenly mixed on the long side, splitting its trade between either widening or narrowing its earnings-driven gains in follow-on regular session play. The mixed trade off earnings-driven after hours gains gives us some pause on the long side, but the broader widening pattern in place may hold out some early prospects for longs to catch some outsized added gains through the morning hours on Tuesday. Early longs may want to target possible upside entry points between 4.59 and 4.70, an area that could form as a near-term floor support and perhaps see some bumps back into the 4.70s.

Dycom (NYSE:DY) advanced 7.4% at 20.70 in Monday's after hours following its better-than-expected Q1 results. DY firmed to plus-side levels of 19.80 to a high of 20.90 and stayed in this area through the bulk of evening action. A pre-bell open Tuesday may have legs surrounding the 20.40 area. Buyers looked confident in Monday's after hours between 19.80 and 20.40, a range where a possible bottom support could form early Tuesday for longs to watch and perhaps catch some upside turns into the higher 20s.


Hewlett-Packard (NYSE:HPQ) slipped 2.1% at 26.28 in Monday's evening session after beating Q4 expectations but also setting its guidance below the Street view. HPQ swung between an early after hours low of 26.03 and a high of 28.34 before setting off on a session-long slide from 27.91 to a late low of 25.95. A pre-bell open Tuesday may have potential in the 26.45 to 26.00 area. HPQ is favoring a pattern where it follows through with more aggressive next-day regular session trade following an earnings-driven after-hours move. It has moved more aggressively in the same direction the next day in 19 of 31 quarters. In the near term, it has added to its evening performance in next-day trade in 11 of the last 15 quarters. Looking deeper into HPQ's movement between the sessions, it has seen an earnings-driven after hours decline in 14 of the 31 quarters we've tracked. In 12 of those quarters, 86% of the time, HPQ has followed its evening decline with a deeper percentage move south in the following regular session. The strong widening trend in place on the downside would have us looking at a short play in HPQ shares Tuesday. Early shorts may want to target possible entry points between 26.75 and 26.25, an area that stood as a ceiling level through the mid-session and second-half of night trade.

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