Earnings roulette season is in full swing, and has come with its share of big winners and equally big losers. On Friday, we saw the #1 stock in the #1 stock group, Applied Optoelectronics (AAOI) blow up in spectacular fashion with a 30% gap-down move. After posting a 50% or so rally over the prior month as it briefly flirted with the $100 Century Mark, AAOI provided disappointing guidance in its Thursday afternoon earnings report.
Of course, AAOI and its cousins weren’t looking too good as of Wednesday, per my discussion of these optical names in that day’s report. On that day AAOI and Lumentum Holdings (LITE) posted big outside reversals on higher volume. Perhaps they were giving investors a clue, but the bottom line is that AAOI should have been sold, at least in part, once it got over 20% above its 10-day moving average two weeks ago, as I discussed and tweeted at the time.
Friday’s move was so bad that it could have been treated as a shortable gap-down once it pushed below the 50-day line, because it just kept going lower from there. By the close AAOI posted a -34.07% loss for the day. When I look at this chart, two words come to mind with respect to the selling: brutal and merciless.
The rest of this report is available for Gilmo Report Members only.The full report will be available 45 days after it is posted. For immediate access: login
Gil Morales & Company, LLC (“GMC”), 8033 Sunset Boulevard, Suite 830, Los Angeles, California, 90046. GMC is a Registered Investment Adviser. This information is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to GMC, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Gil Morales & Company, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2008-2017 Gil Morales & Company, LLC. All rights reserved.