Trade Alert: Earnings, 9/7/2023

Betting on a short squeeze.

Betting this beaten-down name gets a bounce.

A Bearish Bias Toward Retail

Recall that one of our lessons from last week was to have a bearish bias toward retail. Consistent with that, the first three retail earnings trades we placed this week were bearish trades. We’re closing out the week with two bullish trades, but our bias this week will still have been 60% bearish on retail (broadly construed).

Remember the metrics we’re using when selecting these trades:

• LikeFolio’s earnings score based on social data. The higher the number, the more bullish, the lower (more negative) the number, the more bearish.

• Portfolio Armor’s gauge of options market sentiment.

• Chartmill’s Setup rating. On a scale of 1-10, this is a measure of technical consolidation. For bullish trades, we want a high setup rating; for bearish trades, a lower one.

• Zacks Earnings ESP (Expected Surprise Prediction). This is a ratio of the most accurate analyst’s earnings estimate versus the consensus estimate.

• The Piotroski F-Score. A measure of financial strength on a scale from 0-9, with 9 being best.

• Recent insider transactions.

• RSI (Relative Strength Index). A technical measure of whether a stock is overbought or oversold. We’re looking for RSI levels below 70 for bullish trades and above 30 for bearish ones.

Another metric I keep an eye on but don’t post all the time is short interest. If short interest is in the mid-to-high teens or higher, I’ll note it here. That’s the case with our first stock today.

Retail Stock #1

Here’s how today’s first retailer stacks up on our seven metrics:

1. Social data: +41.

2. PA Options sentiment: Bearish (this is likely an artifact of the stock’s low price relative to available options).

3. Setup rating: 6

4. Zacks ESP: 0% (neutral)

5. F-Score: 3

6. Recent insider transaction(s): open market sales in August when the stock was >20% higher than now.

7. RSI: 34

8. Short Interest: 16%

Retail Stock #2

1. Social data: +27.

2. PA Options sentiment: Bullish.

3. Setup rating: 3

4. Zacks ESP: -0.82%

5. F-Score: 8

6. Recent insider transaction(s): open market sales in April.

7. RSI: 30

Details below.

Today’s Bullish Trade #1