Fastenal Company (FAST) Breaches Key Chart Level After Earnings

Fastenal Company (FAST) reported an earnings miss, and the company's shares now find themselves below the critical $40 level of support

Oct 11, 2016 at 2:50 PM
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The first day of third-quarter earnings season has been rough, with construction equipment supplier Fastenal Company (NASDAQ:FAST) reporting earnings that came in just under analyst expectations (subscription required). FAST pointed to the general slowdown in construction, along with price deflation for some of FAST's core products, as two of the main causes for the earnings miss. In the wake of the disappointing profit results, FAST is breaking below a key level of chart support, and put options are flying off the shelves.

So far today, FAST has dropped 5.5% to $39.78, placing it just south of the round-number $40 area that served as a floor for the shares in September. If FAST manages to close below $40 -- home to its year-to-date breakeven at $40.82 -- on a weekly closing basis, it could signify that this supportive level has been truly broken. Traders will want to watch FAST around $40 through the end of this week to determine if this technical floor will hold up once again, or if additional downside may be in store.

Meanwhile, options traders seem to find FAST's intraday breach of the $40 region quite convincing. The stock's option volume is pacing in the 96th percentile of its annual range, with 4,859 puts traded so far -- six times the expected intraday amount. Most active is the October 40 put, where 1,259 contracts have crossed the tape. Data from the International Securities Exchange (ISE) confirms some buy-to-close activity at this strike -- indicating that traders who sold to open puts at the 40 strike are spooked by today's post-earnings drop by Fastenal Company shares, and are potentially looking to avoid assignment ahead of next Friday's expiration.

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