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PreMarket Prep Recap: Growth To Value Rotation Continues With Roku, What To Make Of Twitter Downgrade

Joel Elconin

It's not as if the market needs another catalyst on its relentless march higher, but it got another one overnight and it was discussed at the top of today's PreMarket Prep.

One guess? More news on the trade front as China says the United States agrees to tariff rollbacks if a deal is reached.

Based on the overnight price action, the pre-market high of 3,092.50 was pegged as an upside target for early trading in the S&P 500 index. It has exceeded that level and is slowly making its way towards 3,100.

Deja Vu: Out Of Growth Stocks And Into Value Stocks

On several shows over the past few weeks, the rotation from growth to value was pounded into the heads of our listening audience.

Thanks to Roku (NASDAQ: ROKU), we had another example of this taking place. After Wednesday's bell, the former Wall Street darling did everything right and is getting punished for it. Not even an EPS and sales beat, raised Q4 guidance and 79% increase in active accounts is attracting buyers at its elevated valuation.

Despite being down about $20 in after-hours and pre-market trading, co-host Dennis Dick commented it appeared it has more to go on the downside. For those brave enough to try a buy off the open, the pre-market low ($117.56) was identified as a possible entry point or an area for a potential exit if the decline continues.

It has breached that low by just over a dollar, finding intraday support at $116.26 and rebounding into the mid-$129 handle.

Square Bulls Are Being Awarded

There is one issue that attracts more bullish comments than all others on our broadcast: Square (NYSE: SQ). Besides Dennis Dick, a value investor stepping out of his wheelhouse to own the ssue, Jerremy Newsome of Real Life Trading, Sean Emory of Avory & Co and Sean Udall of The Udall Report have provided bullish commentary on the issue.

After the close, the company announced a solid EPS and sales beat. Although the after-hours and pre-market trading was treacherous (range of $58.06 to $64.75), the issue was consolidating at the $62 area the start of the broadcast. The author of this article noted the long consolidation period since its last report over and under $60 and a close over $65 may signal another move higher in the issue.

Off the open, it matched Wednesday's low ($60.58), reaching $60.54 and continued to make new highs for the session, climbing into the $66 handle.

To Fade Or Not To Fade A Downgrade

For the most part, an issue will move in the direction of an upgrade or downgrade from a respected Wall Street analyst. On some occasions, the fade of an upgrade or downgrade can be rewarding.

Before the open, Evercore ISI downgraded Twitter Inc (NYSE: TWTR) to Underperform citing the potential of high research and development spending to aid its recovery. That downgrade had the issue deep in the red when it was being discussed during the show.

Dennis Dick set up a potential fade of the downgrade with an entry at its current low for the move ($28.82) with a stop commiserate with one's appetite for risk. Off the open, it breached that low reaching $28.63, but has now rebounded back into the $29 handle.

Listeners Applaud New Guest

As much as simple technical analysis is discussed on the show, it's always emphasized that the fundamentals of the company are the most important criteria when evaluating an issue. And what could be more fundamental than a company's earnings report.

Midway through the show, David Trainer, Founder and CEO of New Constructs, shared his unique method of analyzing earnings reports.

On Friday's show, our guest will be Bill Baruch, President of Blue Line Futures.


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