PreMarket Prep Recap: Netflix Beat Not Good Enough, ACP Theory On Tesla

The reversal of Tuesday's weak close, a few earnings reports and as always a discussion on Tesla, were a few of the topics covered on Wednesday's PreMarket Prep Show.

Benzinga · 01/22/2020 16:45

The reversal of Tuesday's weak close, a few earnings reports and as always a discussion on Tesla, were a few of the topics covered on Wednesday's PreMarket Prep Show.

What Virus?

Most of the weakness in the markets on Tuesday was attributed to the deadly outbreak of the coronavirus in China and fears of it becoming a major epidemic.

Although there were more deaths related to the virus, it appears the Chinese government is making progress in containing it. At least, that's what the iShares China Large Cap ETF (NYSE: FXI) was indicating as the issue was recouping much of its earlier losses.

The coronavirus was not mentioned once during the entire broadcast. Instead, the strength in the S&P 500 index futures off its 6:00 p.m. EST open and its implications for another green day was discussed.

Netflix Volatile After Q4 Report

After Tuesday's close, Netflix, Inc. (NASDAQ: NFLX) reported an EPS beat along with a slight revenue beat. However, after its nearly $100 rally since October, the report wasn't good enough.

Co-host Dennis Dick was hands off on either side of issue, while the author of this article identified its previous five highs, ranging from $341.00 to $345.38, as major resistance. As a result, investors looking to exit a long or attempt a lower-risk short were alerted to that critical area.

When it was being discussed on the show, it was trading actively in the green above the $340 area. Obviously, other traders were focusing on that area and it began to leak during the remainder of the show.

As a result, the issue opened much lower and only managed a brief rally to $332.22 before resuming its sharp decline. As of 11:00 a.m. EST, it fell to $326.68 and is attempting to remain in the $330 handle.

Tesla To The Moon, Alice

With the recent price action in Tesla Inc. (NASDAQ: TSLA), it certainly deserves a few minutes of coverage on almost every show. On Wednesday, there was a spirited debate between Dennis and the show's producer, Spencer Israel.

Spencer questioned the merits of the rally and perhaps it was just a continuation of short squeeze. Dennis didn't disagree with the short squeeze theory, but adamantly attributed it to Wall Street analysts who have been chasing the price higher with continued price target hikes as the primary culprits.

The ACP Theory (Analysts Chase Price) coined by the co-host of the show years ago depicts how analysts will raise target prices after a good report or more commonly after it surpasses its previous target.

Jerry Parker Joins The Show

Midway through the show, Jerry Parker, CEO and Chairman Of Chesapeake Capital joined the broadcast. The former "turtle" made some insightful comments on Paul Tudor-Jones comment on Tuesday that the market was "crazy, just like 1999." Also, he discussed stock and commodity positions in his portfolio from both the long and short side.

At 8:35 a.m. EST on Thursday, Marc Chailin of Chaikin Analytics will be our guest to provide us with updates to his Chaikin Money Flow Indicator.