PreMarket Prep Stock Of The Day: A 'Lunch Bet' On Dick's Sporting Goods

When the hosts of the PreMarket Prep Show have opposing opinions on the upcoming price action in a particular issue, they will make a “lunch bet.” The issue that was being debated on Tuesday’s show was Dick’s Sporting Goods Inc DKS.

The Catalyst: Before the opening, the company reported quarterly earnings of $3.64 per share, which beat the analyst consensus estimate of $3.43 by 6.12%. The company reported quarterly sales of $3.35 billion, which beat the analyst consensus estimate of $3.29 billion by 1.82%. 

The company slashed FY22 adjusted EPS to $11.70-$13.10 vs. a $15.42 estimate.

Monday’s Price Action: Along with the broad market, the issue had a rough start to the week. Dick’s closed on Friday at $109.71, had a brief rally to $111.96 and unraveled. It ended the session just off the daily low ($99.19) at $99.50.

The Setup: When the issue was being covered on the show, it was trading at the $102 area.

“That was an awful candle yesterday and you are going to have people that want their money back,” said co-host Dennis Dick.

“With every retailer getting killed yesterday, that does not make me want to own any retailer.”

The author of this discussed the issue perhaps “catching a bid” early in the session and working its way into the upper end of Monday’s range.” Based on the current price action, this technician was predicting an “inside day.”

That is a two-day price pattern that takes place when a second day's range is completely inside the previous day's price range. The high of the second day is lower than the first, and the low of the second is higher than the first.

The Lunch Bet: Dick strongly disagreed with the inside day prediction and stated: “I think it is going to take out the low,” so a lunch bet was crafted.

The author of this article altered the wager slightly from a perfect inside day to the issue closing above Monday’s low ($99.19), a change to which Dick agreed.

Producer Mitch Hoch chimed in, siding with Dick, and stated: “short it.”

DKS Price Action: After a higher open ($102.50 vs. $99.50), the issue reversed course. The ensuing decline found support one penny ahead of Monday’s low ($99.19) at $99.20 and rebounded sharply.

The stock was up 3.45% at $102.63 Tuesday afternoon. 

For now, the issue is having an inside day and is well-positioned to close above Monday’s low with just under three hours remaining in the session.

The discussion on the issue from Tuesday’s show can be found here:

Photo by Mike Mozart via Wikimedia.