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PreMarket Prep Stock Of The Day: UPS

Joel Elconin
·3 min read

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

There are good and bad days to report earnings. On many occasions, the overall mood of the broad market can have an impact on how the Street reacts to a report.

Today happens to be a day that started out bad and got worse. It just so happens that United Parcel Service, Inc. (NYSE: UPS) announced good numbers before the open, but is trading deep in the red.

2020 Price Action: UPS had a mind of its own in warmly 2020. After ending 2019 at $117.05, it went in the opposite direction of the broad market in January, falling to $103.52. It participated in the February and March swoon finding a bottom ahead of the S&P 500 index on March 12 at $82.

That coincided nicely with its March 2013 ($82.28) and April 2013 ($81.95) lows. It benefitted from being a "stay-at-home" issue and surpassed its former all-time high from January 2018 ($135.53()in July and kept going. In fact, it made its all-time high last week at $178.01 and posted its all-time closing high on Oct. 20 at $174.88.

Some Profit-Taking Ahead Of The Report: Since making its all-time high last week, sellers came into the issue instigating a string of lower highs, lows and closes. That streak ended on Tuesday as it made a higher high and low from Tuesday and finished green for the day by nearly $3 (159 to $170.84).

Unfortunately for shareholders, even today’s high for the session ($163.67) is still $2 from the low of the recent decline, which was made on Monday at $166.18.

View more earnings on UPS

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screenshot_2020-10-28_at_2.17.22_pm.png

Blowout Numbers: Before the open, the company reported a third-quarter EPS beat of 42 cents along with a sales beat of $1.2 billion. What may have alarmed shareholders of the issue, along with the steep decline in the broad market, was that the company did not provide guidance due to the uncertainty around the timing and pace of the economic recovery.

PreMarket Prep’s Take: In after-hours trading on Tuesday, at least a few traders were anticipating a good report. Also, the issue was talked up on CNBC’s "Fast Money," with the mention of some bullish call activity taking place during Tuesday’s session. In fact, super-aggressive buyers took the issue over $5 above its closing price to $176 on significant volume.

For Dennis Dick, this was too good of a shorting opportunity and he initiated a short position last night ahead of the report.

“They had it up $5 because someone thought they saw a big call buyer,” he said. “A lot of the good news may be priced into the issue with its incredible run off the March low.”

When the issue was being discussed on the show, it was trading at the $167 area. The author of this article suggested the issue may have a date with $160, but did not anticipate it happening today.

After a lower open, it continued lower, easily breaching $160, falling all the way to $158.17 as of 2 p.m. ET and is attempting to rebound. The current low coincides with its Sept. 24 low of $157.99.

The full discussion on the issue from today’s show can be found here:

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