Following recent earnings, reports both Skechers (NYSE:SKX) and Crocs (NASDAQ:CROX) are looking healthy business-wise, as well as looking like affordable “shoe-ins” for bullish investors on the price chart. Let me explain.
Earnings can be tough business for investors. Sometimes, though, solid results are met with appreciative enthusiasm while still allowing for room to run. That appears to be the case for both SKX stock and shares of CROX.
Let’s take a peek at the latest earnings for each and why, even if you don’t wear them for running, both CROX and SKX stock are ready to rally and deliver profits for investors willing to try them on.
Bullish “Shoe-In” No. 1: SKX Stock
Despite being an athletics shoe company, Skechers isn’t a name synonymous with doing a lot of hardcore jumping around. When consumers buy a pair, it’s all about comfort. SKX stock, on the other hand, is a volatile mover and shaker, especially when it comes to earnings reactions.
In delivering its most recent results — in a report which, much to the delight of Wall Street, boasted growing revenues and profits — shares stayed true to their modus operandi and vaulted higher by more than 15%. But for bullish investors who weren’t already in, don’t sweat it. SKX stock has room to run!
Click to Enlarge As the daily chart of the past year shows, its prior two earnings gaps were filled with the latest report. Now, and if you’re inclined to believe the adage all gaps do get filled, a third, massive air pocket from last April is ready to be challenged!
For investors agreeable with Skechers’ business prospects, a tight multiday price consolidation following earnings is just now being cleared. And with shares having found pattern support at the lower edge of the bearish April gap, technical value is readily available.
With SKX near $33, the initial price target is from $40-$41.50. That area holds potential trend-line resistance and a filling of the price gap may give Skechers investors a technical reason to take profits.
For managing risk and to ensure investors aren’t on the wrong side of the price chart should the more recent earnings gap get filled, I’d suggest an initial stop below $31. This should serve investors well on a technical basis, as well as offering a nice risk-to-reward profile.
Bullish “Shoe-In” No. 2: CROX Stock
They say the trend is your friend. And investors would be hard pressed to find more friendly and persistent price action than in CROX stock over the past year and change. The most recent hurdle cleared was back in early November when the niche, casual footwear and accessories brand announced a huge profit surprise and all-around terrific results.
Click to Enlarge Following the results, shares of Crocs continued by piecing together another couple higher highs and higher lows on the price chart. And with the latest report to be released in less than two weeks, today’s multiweek pullback looks like a great opportunity for bullish investors to try on CROX stock.
Earnings, of course, aren’t without risk. In fact, the possibility for increased volatility does demand sizing positions accordingly in order to keep any losses from becoming ruinous. That being said, for bullish investors who want to buy into a decent-looking turnaround story, you could do a lot worse than buying CROX stock today in anticipation that this bullish trend has a ways to go.
Bottom line though, if you want to truly contain risk with a Crocs stock position I’d suggest buying shares in conjunction with a long put — perhaps the March 26 put — in order to guard against shares biting back harder than anticipated and allowing for open-ended upside profit potential.
Investment accounts under Christopher Tyler’s management do not currently own positions in any securities mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional options-based strategies, related musings or to ask a question, you can find and follow Chris on Twitter @Options_CAT and StockTwits.