Stocks With Weak Earnings That Could Be Headed Lower – BIDU, VMU, COH

By Feb 11, 2013, 6:21 PM Author's Blog  

At T3Live we don’t generally consider it prudent to take stock into earnings if you have a short-term strategy. Instead, we prefer to trade stocks following their earnings reports based on which direction they gap and how they treat that gap in relation to the longer-term trend.

Unlike Apple (NASDAQ:AAPL), which finally saw a much anticipated bounced last week and has filled a portion of its bearish earnings gap, we have seen a number of stocks that have had a hard time bouncing after reporting disappointing earnings. Stocks that have continued to act week following earnings-driven gap downs include VMware (NYSE:VMW), Baidu (NASDAQ:BIDU), and Coach (NYSE:COH). These are stocks we are watching now as potential short opportunities as they are all coming into significant support levels.

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VMW gave a first potential entry today as it broke below Friday’s low of $78.62. The stock is approaching a major support area of $24-26 from 2011 and 2012 lows. A break below this could send the stock lower.

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We see the same scenario in BIDU and COH as these stocks show very little effort to fill their big earnings gap. A break below $95.30 trigger our sell price in BIDU.

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COH has been making its way lower after seeing a big earnings gap down. The $48.38 level is acting as its short-term support as well as last line of defense as this level lines up with 2012 lows of $48.24. A break below this key level could bring out more sellers.

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Disclosure: Scott Redler is long MSFT, C, FB, CRUS, ZNGA, BAC, MGM, GE, TBT. Short SPY

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