Surviving Dell in an Apple World
NEW YORK (TheStreet) -- If you're a current DELL (DELL) investor, last night's earnings release must have felt like putting the finishing touches on a 10-page report and getting the blue screen of death.
Based on my experience with gap downs following earnings reports similar to Dell's, the odds favor Thursday or Friday marking the short-term low. It's not quite time to wish for a price above the closing before earnings of $15.05, but Dell does have strong support near $12. Friday or early next week will likely find bargain hunters picking up shares cheap to flip over. If Friday appears to be closing below Thursday's low, I may join with the bargain hunters for a quick hit-and-run weekend carryover.
Bargain hunters and short sellers covering positions could push the price up about 50% in relation to the gap down price. Looking at the chart, I expect short-term resistance near $14.28. Round numbers often attract like a price magnet and repel, causing a bounce. Expect a lot of volume to trade near $13 a share today, but also be prepared for a closing under $13.30, and more than a 25% chance of a close under $13.If you are looking for today's drop to signal a buying opportunity, you are likely going to find the end of the day Thursday or Friday better than today. There is no hurry jumping on board with Dell. Stocks dumping as a result of earnings misses usually take a full two good earnings quarters to recover. Take your time and do your homework before allocating capital here. Look for the second break above $14.50 as the one that "sticks." Want to see a classic miss earnings result a few weeks after the fact? Take a look at Pandora (P). Pandora disappointed and traded from $14 down to an intraday low under $8. Also, take close note of the next few days after earnings. This is a classic pattern I see often, and you can, too. Simply use your software to look at charts from the past few quarters and review the ones that gapped down the next day. The high placed a couple of days after the gap down in Pandora is now resistance.
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