“In late January, the stock suffered a major collapse as it gapped through long-term support at $82 — falling to a low of $72. Its recent recovery rally ran into trouble at just above $82 after a failed attempt to close the enormous gap at $97 to $80.
“Sell VMW short at $78 or higher with a target of $65. Stop-loss orders should be entered at $86. This is a highly volatile stock, and selling it short is not appropriate for everyone.”
On Friday, the stock fell to a low $70.53. Earnings are scheduled to be reported Tuesday, and analysts are looking for $0.70 per share on revenues of $1.18 billion. A failure to meet this estimate could drive VMW much lower, but for those who shorted the stock, covering now for a small profit may be a wise decision.