Disappointing reaction to in line Perfect World (PWRD) earnings today - obviously the momentum guys piled in ahead of earnings expecting X number and when they did not get it they pile right out. I'm in take no prisoner mode and it's now a broken chart - we have $21.50 as a potential double bottom point but now the stock trades below both 50 and 200 day moving average. One could attempt to buy at $22 and below and sell on a bounce to $25 I suppose, but right now it is no man's land and probably will be range bound until some time passes. I cut back at $23 and it's a 0.6% stake for now. Fundamentals remain excellent but they don't matter.
We mentioned EZCORP (EZPW) on this week's round up and I wrote
EZCORP (EZPW) walked away from a deal it had previously announced; which management said would reduce the quarter earnings and full year earnings by 1 cent. In return for that the stock fell from $18 to below$14, or nearly 25%. That's the market for you. This is a very fragmented sector so it is not like Value Financial is the only company they can acquire for accreditive earnings. We doubled our position, up to a 2.6% stake but we were early buying in the $15.60s. This is right above the 50 day moving average which I had been hoping would hold (the stock broke down the next day). Now the stock is right below the 50 day moving average so if it does not quickly move back up, we have yet another broken stock that the hedge funds can short away at for technical reasons. So we'll monitor this one and if it begins a downtrend we'll be cutting back sharply - we are in take no prisoners mode. Fundamentals mean nothing.
I'm sticking to that as the stock is down 4% this morning and similarly now exhibits a broken trend, so we're cutting back. Who knew how "devastating" losing 1 cent of EPS was. Sort of ridiculous but this is the current market. The chart now shows a stock intent on retesting its 200 day moving average of $13.50. We're cutting here at $14.50s and right back down to a 0.7% stake from 2.6%.
The market remains unforgiving and in this environment we are not going to stick around to see if there are bounces coming. We cut back, and ask questions later. Just like the computers. This entire 6 week move up in EZPW is now demolished in the matter of 2 sessions all on a 1 cent reduction in EPS guidance. Fantastic. Hopefully it settles down there in the $13s.
Long EZCORP and Perfect World in fund; no personal position (just sold PWRD)
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