The last big week of earnings season has a number of well-known names on the schedule, especially among retailers. Lowe’s Companies, Inc. (NYSE: LOW), The Home Depot, Inc. (NYSE: HD), Wal-Mart Stores, Inc. (NYSE: WMT), Abercrombie & Fitch Co. (NYSE: ANF), The TJX Companies, Inc. (NYSE: TJX), Limited Brands, Inc. (NYSE: LTD), Target Corporation (NYSE: TGT), Ross Stores, Inc. (NASDAQ: ROST), Sears Holdings Corporation (NASDAQ: SHLD), The Gap Inc. (NYSE: GPS) and Staples, Inc. (NASDAQ: SPLS) will no doubt make it an interesting week for the retail sector.
Technology also has some play next week, and that’s what we’re looking at. Agilent Technologies Inc. (NYSE: A) is one such name that’s due to report on Monday after the close.
The scientific instrument maker has easily beaten the past four earnings estimates, but performance after these reports has been spotty. Last quarter, for instance, the shares dropped more than 6% in just the day following earnings.
Since peaking in late April, the stock has been in a downtrend punctuated by peaks that have been rejected by the 50-day moving average. That was the case this week, as well, as the shares dropped sharply after surging into this trendline. With the stock hitting a series of lower lows for the past three months, a drop to the $26 level is well within reach.
Given A’s descent since April, you’d think sentiment would be somewhat pessimistic. You’d be wrong, though. The put/call ratio is turning higher from a trough, a sign of gaining put volume. Short interest is negligible, while seven of nine covering analysts rate A a “buy.” That tells us that unwinding optimism could apply pressure to the stock price.
Questionable technicals, optimistic sentiment and a recent history of weaker price action following earnings is a bearish recipe in our book. Play the A Sept 29 Put to ride the expected move down to the $26 level.
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