NOTE: Much of the content of this post was originally published on Friday, November 12, 2010, at 9:20 a.m EST in 12631, a premium service for members of The PPT.
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I made the decision to hold my DDS position through earnings. Frankly, I went out of my way NOT to publicize it because, as I am sure you know by now, I am not the biggest fan of earning gambles. However, in this case I thought that I had enough factors in my favor to hold. For most rules, there are exceptions. In the case of holding a swing trade through earnings, I believe you should be able to articulate your reasons thoroughly and as objectively as possible. Indeed, inside 12631 we may even establish a separate chat room–a Tribunal, if you will–where members who want to hold stocks through earnings must present their case to the Tribunal before actually holding into the report.
In the case of DDS, here were my reasons:
- Extremely constructive price action and outperformance in the days leading up to earnings. (EXHIBIT A: See chart below)
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- A low float combined with high short position–potential for huge squeeze (EXHIBIT B: Check any source, and although numbers may vary, there is still a huge short position in this name with a relative low float, i.e. HUGE short squeeze potential).
- Overall strong momentum in the retail space over the past few months, especially after earnings (EXHIBIT C: See JCP JWN and majority of other retail names and how they have performed with broad market since Labor Day).
DDS is up roughly 10% in the pre-market on their earnings beat and subsequent short squeeze, and I will likely peel some of my position off into this strength today. Congrats to those of you holding.
As of 11/13/10, I have a 1/2 position left in DDS.
Hey Chees:
Had this on one of my scans and tweeted it yesterday. Sorry if I seemed like a copy cat. Just coincidence. Congrats on the trade!
Judy G
Nice job!