PreMarket Prep Stock Of The Day: CrowdStrike

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.

How an issue behaves going into an earnings report has a major impact on the price action following the report, no matter how good or bad it is. A good example of this is the price action in CrowdStrike Holdings Inc. CRWD following its fourth-quarter earnigns beat after the close on Tuesday.

What A Run: Crowdstrike made its debut on Wall Street in July 2019 at $69.10. It caught a bid and raced to $101.88 in August and then went into a prolonged decline. The issue shed two-thirds of its value from the all-time high when it faintly bottomed in March 2020 at $31.95. It rebounded strongly and was at $55.68 by month’s end.

It traded higher in nine of the next 10 months with the torrid rally finally coming to an end last month when it peaked at $251.28.

Rotation Out Of Growth Stocks: Over the past month, there has been a wicked rotation out of growth stocks with high price/earnings ratios and into value stocks. Even at $205, the CRWD sports a forward price to earnings ratio of 769. It certainly went higher than that, when it peaked in February.

After ending the March 1 session at $223.40, the bottom fell out over the next four trading sessions. During that period it swooned to $168.17 and rebounded to close March 5 at $183.12. That low came in between its Dec. 10 ($164.15) and Dec. 11 ($171.38) lows.

Rebounds Ahead Of The Report: Until Tuesday, the rally off the low was capped at $208.10. In Tuesday’s volatile session, it bottomed at $193.50, peaked at $209.10, and ended the session at $196.31.

After the close, the company announced an adjusted EPS of 13 cents, which beat the 8-cent per share estimate, with a sales beat of $264.90 million versus a $250.44-million estimate. The company raised guidance on both fronts by incremental amounts.

‘Overhead Supply’: Since the issue had undergone a huge decline over the past month, there is plenty of “overhead supply” that had to be figured into the price action. In other words, when the issue first breached $200 on its way to $251.28, there were all winners and losers in this issue.

After the retreat, however, some investors are stuck long at much higher prices and others that are long from much lower prices may decide to ring the register.

Resistance Levels Discussed: During Tuesday’s “At The Close” Show (3:30-4 p.m. EST), the author of this article discussed potential resistance levels in the event of a good report. Investors were alerted to a significant area from the daily charts. Obviously, the first one being the high of the rebound from Tuesday’s session at $209.10, which was just over a pair of highs in the $208 handle from earlier in the month.

Adding further importance to that area was the location of the 50% retracement from its previous tumble ($251.28 to $168.67), which comes in at $210.

After Hours Price Action: Off the headline number, the issue blasted from its just beyond the aforementioned area, reaching $211.97 and sharply reversed course. As of 11:30 a.m. EST, the issue traded down to $191.26 and has done no better than $207.63 on the upside.

At this time, it's trading higher by $1.71 at $198.02.

The full discussion on the issue from Tuesday’s “At The Close” show can be found here.