by Serge Berger | February 6, 2014 8:14 am
3D Systems (DDD) — the largest among the 3D printing stocks — announced a Q4 earnings estimate bombshell Wednesday morning that sent DDD stock plummeting in yesterday’s trading.
Specifically, 3D Systems announced that it now expects Q4 earnings to come in between 83 and 87 cents, which is meaningfully lower than its previously estimated range of 93 cents to $1.03 per share. DDD further noted that while its professional 3D printer sales were strong, demand for consumer devices was weaker than expected.
What really ate at DDD stock holders was the outlook for fiscal 2014. 3D Systems now expects to earn 73 to 85 cents in FY 2014, which was miles below the $1.27 expected by analysts. Sales also were guided lower at a range of $680 million to $720 million, though that’s still higher than Street estimates of $671.3 million.
That all resulted in a 15%-plus decline for DDD stock, not to mention pain for its brethren — ExOne (XONE) declined 11%, while Stratasys (SSYS) and Voxeljet (VJET) each fell 6%. But as a result, 3D Systems reached an important technical support area.
When I last discussed the charts of DDD stock on Jan. 15, I noted some immediate-term support levels that would be confirmed as better support if we were to see follow-through buying. While we did get this buying, it was extremely weak and didn’t qualify for a better bottom in DDD stock … and it ultimately gave way to much more downside in the ensuing weeks.
In the longer-term time frames, DDD stock on Wednesday reached its 200-day simple moving average (red line) for the first time since April 2013. The sharp, nearly 40% decline in DDD since the beginning of 2014 has thus brought it back to a more neutral space, after having a slope late in 2013 that clearly was not sustainable. This important mean-reversion move should allow DDD stock to begin a healing process, though it’ll take some time.
On the closer-up chart, note that Wednesday’s price action led 3D Systems to break below its 100-day moving average (blue), which had acted as support in prior days. The big-volume selloff was likely necessary to shake more weak hands out of the stock, which often is the case for high-flying stocks in hot industries (e.g., DDD and 3D printing stocks).
From here, DDD stock needs to repair itself and show that it can hold its 200-day MA. Like I said above, this could take a few days to a few weeks, but ultimately the stock should respect this level and begin to slowly move higher again. Should 3D Systems break below the 200-day MA and not show any follow-through commitment, then it likely has at least another 5 to 10 percentage points of downside and is best left alone for the time being.
One step at a time. Let the price action speak to you.
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Learn more about the strategies Serge Berger uses to create profits in the market every day. Download his trading plan in the Essence of Swing Trading e-book by clicking here. As of this writing, he did not hold a position in any of the aforementioned securities.
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