Affirm Surges Heading Into Q3 Earnings: How To Play The Stock

Affirm Holdings, Inc AFRM is set to print its fiscal third-quarter financial results after the market closes on Thursday. The stock was trading more than 20% higher heading into the event.

When the fintech company printed its second-quarter results on Feb. 10, the stock opened 10% lower the next trading and fell an additional 50% over the 21 trading days that followed.

For the second quarter, Affirm reported a loss of 57 cents per share, which missed the consensus estimate of a loss of 34 cents per share. The company reported revenues of $361 million, which beat the 328.8 million consensus estimate.

Earlier this week, analysts weighed in on Affirm. On Tuesday, Stephens & Co. downgraded Affirm to Underweight and lowered its price target to $17 and on Wednesday JP Morgan Initiated coverage on the stock with a Neutral rating and announced a $30 price target.

Affirm has plummeted over 90% from its Nov. 8, 2021 all-time high of $176.65 and has declined about 83% this year. On Thursday, the stock bounced up from a new all-time low of $13.64.

From a technical standpoint, Affirm looks set for continuation to the upside but it should be noted holding stocks or options over an earnings print is akin to gambling because stocks can react bullishly to an earnings miss and bearishly to an earnings beat.

Options traders particularly, those who are holding close dated calls or puts, take on extra risk because the intuitions writing the options increase premiums to account for implied volatility. The implied move for options of Affirm expiring this week is a whopping 30.42%.

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The Affirm Chart: Affirm has been trading in a steady and consistent downtrend since March 30, with the most recent lower high printed at $33.81 on April 29 and the most recent confirmed lower low formed on April 27 at the $28.22 mark. If Affirm reacts positively to its earnings print, Thursday’s low of day will create the next lower high in the pattern.

• On Wednesday, Affirm fell to the $14.49 mark, which is within pennies of Thursday’s low-of-day. This may have created a bullish double bottom pattern and if the pattern is recognized, Affirm is likely to trade higher again on Friday.
• Despite Affirm surging on Thursday, the stock’s relative strength index (RSI) remains at the 30% level. When a stock’s RSI reaches or falls below that level it becomes oversold, which can be a buy signal for technical traders.
• Affirm was trading on higher-than-average volume on Thursday, which is also a good sign for the bulls. At press time, over 28 million shares of Affirm had exchanged hands compared to the 10-day average of 11.84 million.
• Affirm has resistance above at $26.06 and $32.29 and support below at the all-time low.

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