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This morning I’m recommending a bearish trade on Boingo Wireless, Inc. (NASDAQ:WIFI), the commercial mobile wireless solutions provider.
Last week, my indicators gave me neutral readings for the first time in 2019 and for the first time since the market bottomed in late December. The upward momentum in the market started to slow last week, and this confirms to me that the market is indeed stalling out at overhead resistance near the 2,815 level.
The market has been on a very impressive run lately, so it may actually be a good thing for the longer term if the market takes a pause and consolidates at current levels. It’s not unusual for a stock or the market to consolidate after a strong bullish move, as that can sometimes create a base of support for the next move higher.
Still, it’s really anyone’s guess as to where the market will be a month or even a week from now, and I am recommending a bearish play as portfolio protection. WIFI has been struggling lately, and that makes it a good target for our trade this morning.
WIFI Beat Earnings, But Not by Much
The company reported earnings last week, and it was expected to report earnings per share (EPS) of -$0.09, but it beat expectations by $0.10. That may seem good, but at its last earnings report, WIFI beat expectations by $0.09, and it still lost more than 15% of its value in one day.
Though some analysts still think the stock is worth buying, the technical picture for WIFI doesn’t look strong in the near term.
Retesting the $18.50 Low
Shares reached their 52-week low on Dec. 24, 2018. Right now the stock is sitting just under $21 after earnings, and if its behavior in November is any indication, it could head back down to the $18.50 level.
Daily Chart of Boingo Wireless, Inc. (WIFI) — Chart Source: TradingView
WIFI crossed below its 200-day moving average (MA) in November. Since then, its 200-day MA acted as resistance two times.
When rejected at that level in late November, WIFI started falling for several weeks. In the run up to its recent earnings report, WIFI bounced bounced off that level again.
With its poor earnings performance and weak technical picture, I think it will head back down toward its 52-week low, and we have a chance to profit when it does.
Buy to open the Boingo Wireless, Inc. (WIFI) May 17th $20 Puts (WIFI190517P00020000) at $1.40 or lower.
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InvestorPlace advisor Ken Trester brings you Power Options Weekly, which delivers 5 new options trades and his latest trading advice to you each Friday. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.