World Wrestling Entertainment (WWE: sentiment, chart, options) is slated to report quarterly earnings before the market's open on Tuesday. More specifically, WWE is forecast to report earnings per share of 17 cents, with the Street predicting revenue of $115.01 million. With rising price action and a thumbs-up from analysts, why are investors so pessimistic?
On the charts...
Like Rocky Balboa, WWE shares have come from behind. In mid-January, the stock was pinned underneath its 10-, 20-, 50-, and 80-day moving averages, trading around the 14 level. Since then, the stock has managed to combat all of those trendlines, and is now positioned atop its 10-day moving average, hovering just above the 15.25 marker.
From a broader perspective, the stock has been consolidating since early August, bouncing off the 14 level only to be consistently capped at 15.75. However, this week the stock temporarily breached resistance from its 50-week moving average for the first time since mid-July, but has since retreated back into its trading range.
Analysts in its corner
In parity with its recent short-term uptrend, analysts seem to be gathered in the bulls' corner. According to Zacks, WWE holds 3 "buy" or better ratings, compared to only one "hold" rating. Though this configuration leaves potential room for downgrades – especially considering 2 of those ratings are "strong buys" – it does reiterate the Street's faith in the equity ahead of earnings.
A short fight?
Despite the technical feats and analyst love, short sellers aren't yet convinced of WWE's strength. Though short interest has declined more than 7% since the latest recording period, the stock still boasts a high short-interest ratio of 9.93. In other words, it would take about 10 trading days at the stock's average daily volume to buy back these shorted shares. This pessimism in the short-selling world could work to WWE's fighting advantage; a stronger-than-expected earnings report could trigger a short-covering rally.
To read more of my and my colleagues' thoughts on the market, please visit our Schaeffer's Daily Market Blog section throughout the trading day.
Discuss this article:
Post your own comment
More articles:
Due to the diversity available to options traders, investors have many paths toward achieving a profit. For a bearish trader, the simplest path is to buy (to open) a put contract. By doing so, the trader is placing a bet that the underlying stock will trade significantly below the option's strike price by that contract's expiration date. This strategy is pretty straightforward, but it fails to take into account the potential complexities involved in positioning your portfolio to profit from stocks that are not in a clearly defined downtrend. What's more, due to the size of the drop needed in the underlying security, an outright put purchase often rules out stocks that have additional downside potential, but which could stall near technical support levels. read more...
McDonald's Corp (MCD: sentiment, chart, options) is in the news this morning as the company announced a 2.6% increase in January sales at restaurants open at least 13 months. Same-store sales in the closely watched U.S. region fell 0.7%, while those in Europe and in the Asia/Pacific, Middle East and Africa region both rose 4.3%. read more...
Bristol-Myers Squibb (BMY) read more...
Option traders are betting on a continued slump for casino concern Bally Technologies Inc. (BYI: sentiment, chart, options) , despite an upbeat analyst endorsement over the weekend. read more...
Aetna Inc. (AET) read more...
Research In Motion Limited (RIMM: sentiment, chart, options) has attracted an unusual amount of attention from option traders today – especially on the put side of the tape. In early afternoon activity, the BlackBerry maker has seen roughly 17,000 puts change hands, already surpassing the stock's expected single-session volume of about 15,000 puts. read more...
Earnings season is upon us, and investors all across Wall Street are hoping to take advantage of these potentially volatile few weeks. Large bull (and bear) gaps, upgrades and downgrades, and short squeezes all become increasingly more likely during this period, as companies meet, beat, or miss quarterly expectations. As such, it is imperative that traders be well equipped to deal with all of the eventualities. read more...
NRG Energy (NRG) read more...
Bullish call spreads are known by a variety of different names among options traders. But whether the position is a bull call spread, bullish debit spread, or a long vertical call spread, it is still constructed by purchasing an at-the-money or in-the-money call while simultaneously selling an out-of-the-money call. The reasoning behind pairing up these seemingly contradictory options is really quite simple: limited risk. read more...
McDonald's Corp. (MCD) read more...
Today's Most Popular Stories
working... 
