Trading Blueprint for Crocs (CROX) Stock

Footwear maker Crocs Inc. (NASDAQ: CROX) has been engaged in a strong growth spurt driven by solid results.  The company preannounced on Jan. 13, 2020, that it expected Q4 2019 to be the strongest fourth quarter in history. This sent shares rocketing to 52-week highs at 43.79 following the announcement. The maker of clogs had a perfect storm of factors including higher pricing, higher unit sales and levering of fixed supply chain costs to offset currency headwinds resulting in improved margins across the board. Shares have sold off over 25-percent since the announcement, which begs the question as to whether management sabotaged itself with the very bullish upside pre-announcement. Are expectations already factored into the shares setting up a premature sell-the-news event or is this a pullback opportunity to get on the train? Pivotal Research lowered its CROX price target to $46 on Feb. 24, 2020.

Earnings Catalyst

CROX reports Q4 2019 earnings post-market on Thurs. Feb. 27, 2020, followed by the 8:30am EST conference call. The company raised Q4 and FY 2019 guidance. Consensus analyst estimates are for a profit of 0.08 EPS on revenues of $261.50 million. The recent coronavirus pandemic triggered market sell-off has called many companies to revise forward guidance lower due to disruptions in global supply chains. Chinese manufacturing factories have been hit hard with production delays as worker shortages continue from government mandates to contain the spread of the virus. Further outbreaks in South Korea and Italy have stoked more fears sending global equity markets into a tailspin. CROX set the bar high with the Q4 2019 upside preannouncement with a large contributing factor being the leveraging of their fixed cost supply chain. Any backtracking or guide down could further crumble the shares and dilute management’s credibility. The company guided 2020 revenue growth of 12-percent to 14-percent.   

Rifle Chart Technical Analysis Trajectories: Longer-Term

We use the rifle charts on wider time frames to lay out the playing field suitable for swing traders and investors. The monthly stochastic has stalled at the 80-band as shares peaked at the upper Bollinger Bands (BBs) and rug pulled through its 5-period moving average (MA) at 36.85. This will set-up either a bullish mini pup above the 5-period MA at the 37 Fibonacci (fib) level.  If the stochastic crosses down, then further selling can trigger towards the monthly 15-period MA at 28.38 fib. The weekly rifle chart triggered a market structure high (MSH) under the 39.97 fib as stochastic sharply collapsed under the 80-band further crushed by a gap down on macro market sell-off and the downgrade from Pivotal Research on Feb. 24, 2020. The weekly lower BBs are near the 29.96 fib. The daily stochastic bounce attempt turned down forming a bearish daily inverse pup with lower BBs at 34.23. The question is whether this sharp pullback from highs is a premature sell the news event enabling investors to capitalize on an excessive selloff.

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Sympathy Stocks:

CROX is a niche footwear player that may have marginal effects on other footwear and athleisure plays including Sketchers USA (NYSE: SKX) , Nike (NYSE: NKE) , Lululemon Athletica (NASDAQ: LULU) and Under Armor (NYSE: UA) . Sports retailers may also see action if CROX shares get an exceptional gap, these include Foot Locker (NYSE: FL) , Dicks Sporting Goods (NYSE: DKS) and Finish Line (NASDAQ: FINL). Always gauge if positive correlation is present before trading sympathy stocks.

Trading Game Plan for Earnings Gap:

This information is accommodative to intraday and short-term traders looking to play the earnings gap.   With a post-market earnings release followed by an immediate conference call at 4:30 pm EST. Only the nimblest traders should even consider hitting the immediate reaction on the post-market release. Investors are anticipating an upbeat conference call, so it may be worth waiting for the reaction into the Q&A session if considering playing the post-market reaction. Nimble post-market traders can scalp the price gap reversion levels, but most should wait for the morning session off the opening bell. Traders can expect scalps ranging from 0.35 to 0.75 in the first 20-minutes as ranges and spreads eventually contract.

Reversion scalps off the key price inflections levels can be played for the second gap reaction then shift focus to the third reaction trend move. The gap price reversion levels for the upside price gaps are: 37 fib/weekly 5-pd MA, 39.10 fib, 40.85 fib, 42.96 fib. Downside gap reversion price levels are: 32.55 fib/sticky 2.50s zone, 30.52 fib/sticky 5s zone, 29.95 fib and 28.49 fib. Traders can trade the in-between fibs and sticky 2.50s levels intraday for price reversions on the first tests.