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PreMarket Prep Recap: Morgan Stanley Beats, Tesla's Battle For $500 And Shorts On The Run In Signet Jewelers

January 16, 2020 11:51 am
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PreMarket Prep Recap: Morgan Stanley Beats, Tesla's Battle For $500 And Shorts On The Run In Signet Jewelers

Movers off earnings along with a potential top in Tesla were a few of the topics on today's PreMarket Prep Show. Also, the recent short-squeeze theme in a variety of issues continued today.

Morgan Stanley Follows Suit With Q4 Beat

Keeping pace with the other large banks that posted beats, Morgan Stanley (NYSE:MS) didn't disappoint. Not only did the company beat on EPS by 17 cents, the sales beat was $1.07 billion.

The issue, which has been a laggard in the sector coming off the financial crisis lows, is playing catch-up in a big way. The strength of the rally is catching many investors by surprise, including co-host Dennis Dick who was thinking of shorting the issue at the $55 area.

That quickly changed when the issue ripped higher during the remainder of the broadcast. After a much higher open, the issue had a brief retreat to $55.65 and resumed its rally. As of 10:15 a.m. EST, $56.94 stands as the high for the session and it has backed off that elevated level.

That marks the highest level for the issue since March 2018, when it peaked at $59.38.

See Also: Here's How Much Investing $100 In Morgan Stanley Stock Back In 2010 Would Be Worth Today

Double Catalyst Brings Tesla Back To $500

The parabolic four month rally in Tesla Inc. (NASDAQ:TSLA), rallying from its October low ($224.28) to $547.41 on Tuesday is taking a breather in today's session.

There are two negative catalysts for the issue that are instigating the decline. The first being a downgrade from widely followed Morgan Stanley analyst Adam Jonas, who lowered his rating from Equal-Weight to Underweight. He raised his price target from $250 to $350, which is considerably lower than its current level. Also, it was reported new Tesla registrations in California were halved in the fourth quarter.

Since the issue was deep in the red when it was being covered on the broadcast, the hosts of the show were leery of shorting it "in the hole." In other words, joining the strong momentum on the downside and not fearing any kind of a rebound.

From a longer-term technical perspective, the author of this article identified potential support at the pair of lows at the $473 area from Jan. 9 and 10. On the upside, the lower-end of Wednesday's range ($516.79) up to the close ($518.50) is a potential resistance point.

After a much lower open, it immediately bottomed at $492.17 and rallied to $509.42 and is consolidating at the $500 area.

Next Up On The Short Squeeze Carousel: Signet Jewelers

Over the past few weeks, stocks that have been in the doghouse for quite some or momentum stocks with a high short interest have undergone major rallies.

That trend continues today in Signet Jewelers (NYSE:SIG). Before the open, the company reported holiday comps were up 1.6% and e-commerce sales were up 13.6%.

As a result of the stronger than expected holiday season, the company raised guidance.

During the broadcast, the issue ripped higher with seemingly no end to the rally in sight. Dennis Dick warned investors who wanted to short the issue to keep mind it has an all-time high from October 2015 ($152.27), making it extremely difficult to determine when the short squeeze will end.

After a much higher open, it had a brief retreat to $27.62 and resumed its rally. As of 11:20 a.m. EST, $31 stands as the high for the day and it's now attempting to remain in the $30 handle.

Greg Harmon Will Be Friday's Guest

At 8:35 a.m. EST on Friday's show, Greg Harmon, the founder of DragonFly Capital Management will be our guest. He will provide updates on his current short and long-term portfolios.

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