Post-Earnings Selling Sets Up Opportunity In Lender Processing Services

(This is an excerpt from an article I originally published on Seeking Alpha on November 26, 2012. Click here to read the entire piece.)

I have followed Lender Processing Services (LPS) for a little over two years. It all started soon after LPS sold off swiftly in the wake of disclosures regarding “foreclosuregate” in late September, 2010. At the time, I noticed that options traders were well ahead of the game by loading up on puts ahead of the news. {snip}


LPS breaks down below 200DMA support after reporting earnings
LPS breaks down below 200DMA support after reporting earnings


The recovery in LPS this year stopped just short of recapturing all foreclosuregate losses
The recovery in LPS this year stopped just short of recapturing all foreclosuregate losses

The post-earnings sell-off lasted for two brutal, high-volume days with the stock finally bottoming at $21.68 – a 21% post-earnings loss. The sharp rebound that day has all the look of a wash-out of sellers even though high-volume selling temporarily returned the following day. {snip}

With no smoking gun coming form the earnings report, I looked at the market’s reaction to earlier earnings from CoreLogic, Inc (CLGX). {snip} Given this trading action, I have to conclude that what happened was mostly profit-taking.


CLGX is clawing back from a massive post-earnings fade
CLGX is clawing back from a massive post-earnings fade


Weekly view shows a stock that was an incredible bargain at one point in 2011
Weekly view shows a stock that was an incredible bargain at one point in 2011

Source for charts: FreeStockCharts.com

{snip}

Finally, note that shares short in LPS dropped to its lowest level in over two years just ahead of earnings. {snip}


Shares Short in Lender Processing Services (Oct 15, 2009 to Oct 31, 2012)
Shares Short in Lender Processing Services (Oct 15, 2009 to Oct 31, 2012)

Source: NASDAQ.com Short Interest

Be careful out there!

(This is an excerpt from an article I originally published on Seeking Alpha on November 26, 2012. Click here to read the entire piece.)

Full disclosure: long GS

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