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PreMarket Prep Stock Of The Day: Slack

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PreMarket Prep Stock Of The Day: Slack

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.

All stocks need a catalyst to move out of a consolidation pattern.

On most occasions, the catalyst is fundamental news released by the company, such as earnings, or an analyst upgrade. And sometimes the catalyst is news from a related issue. That's the case with the PreMarket Prep Stock of the Day, Slack Technologies Inc (NYSE: WORK), developer of the eponymous workplace collaboration platform. 

Slack's Post-Earnings Beat Down: Slack came within a few dollars of its $42 all-time-high from June 2019 — the month of its IPO — when it reached $40.07 on June 4.

The day before, Slack posted its all-time closing high of $39.90.

When Slack reported first-quarter results after the close June 4, the company beat EPS estimates by 4 cents and sales by $14 million — but it did not meet investor expectations.

The day following the report, the stock fell from $37.94 to $32.56.

Slack's Failed Rally Attempts: Over the next few months, the issue was turned back on every occasion on which it tried to rally.

Slack did manage to rally to $36.23 on July 13, but weakened to end the session at $33.42.

On a few other occasions, Slack mounted a one-to-three-day rally before quickly giving back the gains.

Big Slack Buyers In August: Before an issue makes a sustained move in either direction, it will often attract institutional buyers or sellers who will take days or even months to build a large position. That just happened to occur in a $1 range from $27.50-$28.50. Over the last 13 trading sessions, Slack has made a daily low in that range on all but one occasion.

When taking a closer look, a vast majority of Slack's daily lows were in the $27.53 to $28.14 range, with a near-perfect triple bottom on Aug. 10 ($27.57), Aug. 11 ($27.54) and Aug. 12 ($27.54).

The Slack Catalyst: After the close on Tuesday, salesforce.com, inc. (NYSE: CRM) reported a huge second-quarter EPS beat of 77 cents along with a sales beat of $250 million.

The report was yet another catalyst for Salesforce, as it was added to the Dow Jones Industrial Average on Monday.

After Monday’s $8-plus gain, Salesforce jumped by nearly another $60. The stock was trading 26.68% higher to $273.70 at the time of publication Wednesday. 

Intuit Inc. (NASDAQ: INTU) also posted a second-quarter beat and is trading 2.17% higher at $343.73.

Tech Stocks Already On Fire: The Salesforce and Intuit earnings reports added even more momentum to the new technology sector, which has been firing on all cylinders.

As a result, investors are piling into anything new and tech-related, and Slack falls into that category.

Slack's Price Action: After a higher open Wednesday, Slack dipped just 4 cents and found support just above the top of Tuesday’s range ($28.84) at $28.90. The stock then resumed its move higher.

As of early Wednesday afternoon, Slack has reached $31.04 in the session and backed off the high into the mid-$30 handle. 

Slack was trading 7.6% higher to $30.74 at last check. 

Wednesday's session charted the highest level Slack has reached since it peaked Aug. 6 at $31.27. If the rally continues, the next daily resistance level comes in at its July 23 high ($31.72).

Photo courtesy of Slack. 

 

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