SHLD Broken After Earnings

Traders took down SHLD after earnings today turned out to be a disappointment to many. The numbers in particular that disappointed: US same store sales fell 4.8%, earnings came up short with 83 cents per share and revenue fell to 11.94 billion which was below analysts forcasts.

I however think that SHLD has great potential for a short term bounce and a longer term investment. Looking at the stock technically, SHLD traded lower (around 6%) for the day, broke its uptrend but seemed to gain some support on its 50 sma that it touched. Volume was much heavier than usual with 7,085,286 shares trading hands. However, I do not think this stock will be down for that much longer. This is more of an overreaction by people, the same type thing that happened with HOLX last week. Plus with Cramer's endless promotion machine going full steam as he is in love with Lampert, I really doubt there will be too much more selling. That means, the stock could hold the 50 sma. But if that does not hold then I'd look to buy it around 162ish where a lot of trades took place (volume by price) and where strong support should lay. Around this area, the downward momentum will break, people will realize they're getting a deal and you'll get a bounce. That's the short term play. The main thing is to closely monitor the price action. The bounce could happen quickly.

While SHLD could be traded for a short term bounce, I can also see this stock as more of a long term holding. Although this is not my typical style, like many have said before me, I believe Sears to have the potential to really expand into a full blown Berkshire-esque investment vehicle with famous Eddie Lampert at the helm. Jim Cramer has compared it to investing in a hedge fund with less risk. Jonathan Edwards over at thestreet.com shows that the expansion of Sears under Lampert is already starting. He says, "During the quarter, the company reported income from these swap contracts of $101 million. While that income doesn't reflect the conditions of the underlying retail business, it's still money in the bank that can be used to buy back stock." That sounds good to me.

This seems like its just a beginning for SHLD and while today's numbers might be misinterpreted and overreacted on by the crowds, I believe SHLD has more upside. I'd look to get in for both the long term and short term pretty soon. What you need to do is watch the price action and 50 sma. Also, you could buy in steps. Take in a little now and see if it comes in anymore.


One More Thing:
NYMEX debuts on the NYSE tomorrow. I've heard predictions of this stock reaching 85 by the end of the week and even furthur expansion into the future. I don't doubt that at all. As for the short term, you can bet Cramer will be pumping this thing for weeks just like he has been pushing the NYX itself. You've seen the results of that. I'm gonna see what I can do tomorrow about getting a piece of the pie and the profits. Maybe you should do the same.