U.S. Markets open in 1 hr 33 mins

PreMarket Prep: Beyond A Random Walk For Earnings Stocks

Joel Elconin

With Wednesday being one of the busiest days of the third-quarter earnings season, there were many reports to cover on PreMarket Prep before and after the releases.

Another Leg Lower For iRobot

Even if one had iRobot's (NASDAQ: IRBT) report ahead of the print, it would have been very hard to capitalize on it. The numbers were good, but weak guidance sent the issue into a tailspin after the initial surge.

Co-host Dennis Dick, who owns the issue in his long-term portfolio, tried to sneak out of his long on the initial pop at $60.00, but entered his offer after it peaked at $60.97 in the after-hours session. Not being fooled by the headline number, he figured the weak guidance would attract sellers. Unabashed selling took the issue to $43.27 before it began to rebound.

By the start of Wednesday's show, it was observed that some patient buyers began to emerge in this issue and that pre-market low may hold for the day. As it turns out, the issue bottomed pennies below its opening print at $44.00, rallied to $49.47 is attempting to end the session above $48.

Itchy Finger Ahead Of Snap's Q3 Report

Sometimes, after-hours and pre-market traders get things right with size. Sometimes, they're dead wrong.

In after-hours trading on Oct. 16 and pre-market trading on Oct. 17, for example, an investor bought millions of shares (from $8.50 to $10.50) of Cronos Group (NASDAQ: CRON) on no news. It peaked off the open at $10.56 and finished the day at $8.86. The decline continued as the issued reached $8.06 on Monday and has begin to rebound.

Similar action took place in Snap Inc (NYSE: SNAP) ahead of its earnings print, but not in such a big way. Before Tuesday afternoon's release, the seller took the issue from its closing price $14.00 all the way to $11.89 before being mopped up.

Once again, the third-quarter beat was overshadowed by fourth-quarter guidance that didn't meet the Street's expectations. After not being able to hold its closing price off the open ($14.00), the issue is trending towards the $13.00 area. Perhaps the investor was nervous ahead of the report, but if he or she was a patient seller into the open, liquidity could have fetched much better prices on the sales.

Chipotle Beat Attracts Nothing But Sellers

For further evidence of the random walk theory on Wall Street, take a look at the price action in Chipotle Mexican Grill (NYSE: CMG) after its third-quarter beat for EPS, sales and comps. After bolting to a new all-time-high at $860 in after-hours trading, lower guidance for fourth-quarter comps turned the tide in a big way.

When covered on the show, the issue was hovering at the $810 area. The author of this article noted a trap-door at that level since $810.77 was its Oct. 9 low. Once breached, it had room down $800 and beyond. Just after the open, it breached $810.00, sunk to $782.49 now is attempting to end the session above $790.

Chris Temple Joins The Show

Midway through the broadcast, Chris Temple of The National Investors joined the broadcast with a conservative approach to market as we approach all-time-highs.

On Thursday's show, CNN Digital Correspondent Paul La Monica will be our guest to appraise earnings season so far and what to expect for the remainder.

See more from Benzinga

© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.