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To say Slack Technologies (NYSE:WORK) has been a disappointment would be an understatement. Its price has been stuck in neutral ever since 2019’s IPO. And the one breakout attempt we’ve seen along the way had its legs ripped out from under it by last quarter’s nasty earnings report. In today’s article, we’re going to chronicle why Slack stock has been so rough, and why you might want to wait until after next month’s earnings report before buying.WORK) sign on the company's headquarters in San Francisco, California." width="300" height="169">
Source: Sundry Photography / Shutterstock.com
On the fundamental front, Slack hasn’t been able to gain any traction. It has had four earnings report since going public, and all of them saw losses. By itself, that’s not a big deal. It’s when you lose more money than expected that the Street metes out punishment. Both June and March’s announcements delivered EPS numbers that were worse than expected.
Until this pattern of disappointment ends, I suspect Slack stock will be hard-pressed to build out a sustainable trend.
Disappointment on all Fronts
The next quarterly report is slated for Sept. 8, after the bell. Perhaps management will finally pull a rabbit out of the hat.
I, for one, am rooting for it, if for no other reason than the good news will finally inject some excitement into a stock that has been entirely too dull to trade. If the price action ahead of the announcement is any indication, traders are not optimistic. At a time when the Nasdaq is flying to the moon and tech stocks are beloved by all, WORK can’t even stay above its 50-day moving average.
That’s not even mentioning the fact that the whole work-at-home trend should be working to Slack’s advantage. It offers a service tailor-made for social distancing. And yet, the new themes emerging from the global pandemic have had little impact on its share price. Meanwhile, the Zooms (NASDAQ:ZM) and DocuSigns (NASDAQ:DOCU) of the world have seen their market capitalizations explode. Rest assured, the jealousy among Slack shareholders is running hot these days.
Let’s take a closer look at the chart to identify which levels matter most heading into the upcoming earnings report.
Slack Stock Chart
Source: The thinkorswim® platform from TD Ameritrade
In fairness to WORK, its price chart has seen two moments of glory. The early February and late-May breakouts were oozing with potential and gave bulls their first crack at a decent trade. Unfortunately, neither bid for a robust uptrend bore fruit. The first was upended by the novel coronavirus crashing the market, and the second fell prey to an underwhelming earnings report, which has weighed on the stock ever since.
The July breach of $30 was a significant tell. Buyers’ inability to keep prices on the high side of this critical threshold ultimately turned the trend from neutral to bearish. With the 50-day and 20-day moving averages now cruising lower, there’s no doubt sellers hold the upper hand. The next support pivot comes in at $26, so that’s your next downside target. It would take a sharp turnaround to flip the script bullish. We need to rally back above the prior two swing highs and the 50-day moving average before I’d even think about deploying long positions.
The Best Trade Might Be No Trade
Spectators looking to trade WORK right now should keep a few things in mind. First, the looming earnings report means you only have a short window of time to play if you’re unwilling to brave the binary event. Because of this, I’d honestly suggest steering clear until the report is in the rearview mirror.
It’s probably best to sit on the sidelines until after the report. It may not be a satisfying directive, that doesn’t mean it’s wrong. If you pressed me on a pre-earnings trade, I’d short volatility via a strangle or iron condor. But with the event still two weeks out, there’s no sense in pulling the trigger just yet.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.