EarningsBeats.com Digest for September 30, 2020
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After Raising Guidance, Pullbacks Can Present Opportunities
When a company raises guidance, it's many times treated just like an earnings report. We'll see a "buy on rumor" advance, then a selloff with the raised guidance news. Or sometimes we'll just see a reactionary gap higher with the raised guidance, only to see a subsequent pullback that frustrates those chasing the gap. Element Solutions (ESI) is a $2.6 billion specialty chemical company and we saw a solid market reaction to its recent raised
guidance in early September. Unfortunately, those gains didn't stick and ESI has tumbled roughly 12% over the past two weeks:
This could present a nice opportunity, however. It's now fallen back to test a level of key price support. There was an open of 10.19 on June 15th and a close of 10.23 on June 26th to mark key intermediate-term price support. Tuesday's low hit 10.22 before closing at 10.31. I'd look for a move higher off support to test the June 5th price resistance at 12.00. If 10.19 doesn't hold on a closing basis, you can escape with a fairly
minor loss. A recovery, though, could result in a very nice trading gain of more than 15%.
Happy trading!
Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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