PreMarket Prep Stock Of The Day: Sherwin-Williams

Benzinga's PreMarket Prep airs every morning from 8-9 a.m. ET. During that fast-paced, highly informative hour, traders and investors tune in to get the major news of the day, the catalysts behind those moves and the corresponding price action for the upcoming session.

On any given day, the show will cover at least 20 stocks determined by co-hosts Joel Elconin and Dennis Dick along with producer Spencer Israel.

For those who don't have the time to tune in live or listen to the podcast, Benzinga will highlight one stock that merits further discussion. This analysis is not a buy or sell recommendation.

Since the COVID-19 crisis began, the PreMarket Prep Show has discussed "stay at home" stocks -- companies that benefit from people either working at home or just spending more time at home.

One issue that has fallen under the radar is Sherwin-Williams SHW, which reported earnings this morning and is the PreMarket Prep Stock Of The Day.

Long-Term Winner: After 2011 at $97.53, the issue has basically been on an uninterrupted uptrend, rising 530% to the $630 area. Of course, it was on sale in March when it cratered to $325.43, which coincides with its August 2017 low of $326.68.

Earlier in today’s session, it traded to $659.87, more than doubling off its March low.

Modest Rally Ahead Of The Report: There is almost always a pre-earnings move ahead of an earnings report as investors anticipate a good or bad report. For issues like Sherwin-Willimas that have been in a strong uptrend, the move is higher.

Over the last two weeks, it rallied from its July 13 close ($576.04) to an all-time high on Monday at $631.88 and was just shy of posing a new all-time closing high ($625.52 vs. $625.90).

Q2 Report: Before the open, the company reported a second-quarter adjusted EPS beat of $1.33 along with a sales beat of $70 million. The company significantly raised its 2020 EPS guidance from $16,46-$18.46 to $19.21-$20.71 versus the estimate of $20.52.

Price Action And Commentary From Show: When the issue was being covered on the show, it was in the green by over $20 at the $650 area and had already made a pre-market high at $657. Co-host Dennis Dick commented, "that everyone is sitting at home, thinking of what to do and decide to paint the house, making it a pure COVID play."

"It may not get any better than this," he said. "what are people going to do, repaint their home every quarter?"

Based on the pre-market action, the author of this article identified the pre-market high ($657) as key level for the session. In order for the issue to keep the rally going, it must breach the pre-market high and move into the $660 handle and hold, or it would likely to fade into Monday’s trading range; that was from $623.52 to $631.88 with a close at $625.52.

Price Action Off Open: After a higher open ($650), it breached the pre-market high momentarily reaching $659.8 before sharply reversing course. The ensuing decline took the issue just beyond Monday’s low ($623.53) to $621.57 and rebounded back into the lower $640 handle at the time of publication.