PreMarket Prep Stock Of The Day: Lowe's

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.

Two people can look at the exact same chart and have different opinions, and both may turn out to be right. On Wednesday's PreMarket Prep show, a possible setup on the long for Lowe’s Companies LOW was discussed and almost resulted in the hosts making one of their traditional lunch wagers.

Lowe's Posts Q2 Beat: Before the open Wednesday, Lowe's reported second-quarter adjusted EPS of $3.75, which handsomely beat a $2.95 Street estimate.

Sales of $27.3 billion beat a $24.27-billion estimate.

With such a large beat on both fronts, neither of the hosts anticipated the issue replicating Home Depot HD, which gave up a $2-plus gain Tuesday to end the session over $3 in the red.

Dick A Buyer On A Lowe's Pullback: PreMarket Prep co-host Dennis Dick wanted to buy the issue on a pullback and named $158 as an entry point, with a stop at Tuesday’s low of $157.

Although Lowe's was trading at $161.50, the author of this article was willing to wager that Dick would be able to reach his price.

The reason: based on the trading history for Lowe's on earnings day, it is much more volatile than usual and has big spikes in either direction before reversing course.

Odds Aren't Good Enough: Just as traders are picky on price entry, they do not want to give up an edge to another trader on a wager, even a small one.

As a result, the author of this article demanded 3-to-1 odds that the $158 level would come into play in Wednesday's session. Dick would have nothing of it.

Lowe's Premarket Price Action: At the end of the broadcast Wednesday, Lowe’s was trading at $161.50. My final wager, with 3-to-1 odds, was that Dick would execute his $158 buy if he chose to do so. He balked and no lunch bet was made.

Lowe's Price Action Off The Open: After a higher open, Lowe's blasted to $162.89 and reversed course.

Fortunately for Dick, he did not take the wager and decided against trying to purchase the issue at $158.

If he had, he would been stopped out, as the issue breached Tuesday’s low ($157), falling to $156.25. After making that low, Lowe's rebounded as high as $160.28. The stock was trading slightly positive at $157.92 at the time of publication. 

PreMarket Prep Is All About Scenario Analysis: While many financial gurus promise huge gains with exact entry and exit points in multiple issues — and then highlight their winners — that is not the way it is done on our podcast.

Instead we provide the best scenario analysis based on current market factors and years of market experience, leaving traders and investors to make their own decisions.

Photo courtesy of Lowe's.