The warm glow of the recent bear-market bounce has clearly faded, with stocks taking a turn downward last week and extending losses in a big way this morning.
As a trader, this gets me thinking about ways to profit from upcoming earnings reports, especially those where LikeFolio consumer data indicates the company may be facing significant problems.
Here are three names reporting this week that I’m likely to bet against:
1. Nordstrom (JWN)
Nordstrom reports earnings after the market closes on Tuesday.
Options are currently pricing in a $3 move for the stock this week alone, indicating that the market is expecting this report to create a large movement in the stock in one direction or the other.
This makes sense considering the last four times JWN has reported earnings, the stock has moved anywhere from 17-30% during the week of the report.
What concerns me most about JWN is that LikeFolio consumer demand levels for the current quarter are trending 31% lower than last year’s levels, indicating a weak back-to-school season for the retailer.
I’ll be betting against JWN on this earnings report, but with a 20% short interest, it’s important to trade in a risk-defined manner so that I don’t become part of a short-squeeze higher if my bearish position is incorrect.
2. Abercrombie (ANF)
Abercrombie reports Thursday before the market opens.
This is another stock with high short interest (24%) and a large expected move of +/- 13.5%... so we have to be careful.
Each of the last four times ANF has reported earnings, the stock has declined on the week… with the last three reports resulting in share price losses of at least 15% each.
Like Nordstrom, we’re seeing significant declines in consumer demand for ANF during the current quarter, especially for its Hollister brand, which is clearly falling out of favor with consumers.
I’ll be betting against ANF this week with a risk-defined option spread.
3. Ulta (ULTA)
Ulta reports Thursday after the market closes.
At around $400/share, this is a tougher name to trade, but the LikeFolio consumer data is compelling enough to make me want to give it a shot.
We’re seeing consumer buzz around Ulta brands fading, even during back-to-school season.
In addition, merchandise margin pressures could rear their ugly head at just the wrong time for this company, especially as it faces tough comps vs its 2021 results.
We’re expecting a smaller move out of ULTA than the retailers above, but I’ll still be looking to create a “coin flip” style options trade that either profits 100%+ if ULTA moves lower on the week, or loses if it moves higher.
Bottom line – The narrative around the stock market has shifted negative over the past week, and I’m ready to pounce on some bearish earnings trades using LikeFolio’s incredible consumer data.