Those who bought Box (BOX) - Get Report stock in premarket trading look like they got an outright steal. Shares were changing hands about 18% below Monday's close, well below $14.75 before Tuesday's open. The stock closed down 4.2% on the day, at $17.18, but is over $2.50 off its premarket lows.
Does that make Box stock a buy?
Ask any long-term investor in Box about earnings, and you'll get a pretty good feel for the stock's earnings-based sentiment. Generally speaking, Box stock does not perform very well after releasing its quarterly results and Tuesday it's living up to that expectation.
While the company beat on earnings and revenue expectations for the quarter, management issued a disappointing second-quarter and full-year outlook. So although Box stock has a low valuation among its enterprise software peers, its growth rate is also uninspiring. So is the fact that it continues to disappoint so often on a quarterly basis.
At one point, it looked like Box had it all figured out, with shares surging from $20 to almost $30 in the second quarter of 2018. Since then though it's been troubling.
Let's look at the charts to see if it warrants a long position.
Trading Box Stock
Box stock's post-earnings selloff comes on a day where Coupa (COUP) - Get Report is also moving on earnings and ahead of Salesforce's (CRM) - Get Report quarterly results (here's a preview for CRM). The continuous flow of quarterly results from the group could add additional volatility to Box stock, although it seems to have plenty of its own at the moment.
Above is a multi-year weekly chart of Box, emphasizing some of its longer term ranges. For instance, $16 was once resistance before turning to support. Same can be said for $20 and $24 as well. However, these levels have since given way as support, turning back to resistance, with only $16 left to act as support.
Although Box stock initially broke below $16 on Tuesday morning, it has since reclaimed this mark. These "overshoots" below $16 aren't completely uncommon, having occurred several times over the past few years.
That said, bulls will want to make sure Box stock maintains $16+ going forward. If it can't, it increases the odds of a breakdown. Below $16 puts the regular trading session lows at $15.30 on the table, with its pre-market lows of $14.54 as a possibility as well.
Should $16 hold and this rebound gains momentum let's see how Box stock does with a test of its 200-week moving average at $17.71. Above it puts a test of the declining 10-week moving average on the table. While Box can continue bouncing and even break through resistance, keep in mind the current trend is lower.
This article is commentary by an independent contributor. At the time of publication, the author had no positions in the stocks mentioned.