בס״ד

Exponential Gains Leading Invariably to SOUL-CRUSHING Declines (EXPO)

Posted on August 9, 2021

Exponent Inc. (NASDAQ:EXPO) was founded in 1967 to advise the corporate world in all matters science and engineering.

A group of smart whipper-snappers, they even managed to develop housing complexes based on a LEGO model.

Impressive, no?

Anyway, we had a look at both the technical and fundamental picture over the last several weeks and feel it’s now time to act.

Consider the following –

  • EXPO runs with a P/E ratio of 63.73 and a forward P/E of 61.35!

Why?  Because earnings are expected to shoot skyward?

  • No, consensus growth estimates for the year to come are just 6.53%.
  • Earnings growth for the past twelve months was just 1.20%.
  • Sales growth over the last five years was only 5.00%.

So why all the excitement?

Beats us…

  • Consider, too, that her dividend yield is just 0.70%, and
  • Price to Book is a far-too-jolly 16.00.

All told, we believe this puppy should deliver little more than a knuckle sandwich to the chops of anyone now considering dropping any coin on her.

WHOA!

GUY’S DANGEROUS!

We don’t like stocks like EXPO, that have nary a leg to stand on, but that Wall Street treats like a favorite son.

Earnings were announced at the end of July – and yes, they beat estimates ($0.48 instead of $0.42) – but the elevation hasn’t ceased ever since!

On zero news.

It’s all a bit much, truth to tell.

Have a look –

Technically, the chart is very troublesome –

  1. RSI is WAYYYY overbought (in green),
  2. While MACD has now steep-stalled and is about to taste some gravity.
  3. An incredible 30% rise in three weeks – all of which comes in the shape of an ascending wedge (in red) – has nowhere left to go.   A break below the lower wedge trendline is imminent, after which the sound of ordnance creeping ever closer should be heard.
  4. Rising wedges are always bearish, and support is a long way off – now at the 137 day moving average at 94.
  5. That’s a decline of close to 20%, should she stop there.

And that’s what we’re betting on.

A Jew and His Money recommends you consider the short sale of EXPO stock, now trading at 115.04 and the purchase of a protective EXPO September 17th 120 CALL option for $1.90.  Total credit on the trade is $113.14.

Rationale: the options on offer for EXPO fully reflect the reality that’s about to hit.

That is, there is literally no liquidity up and down the options chain for any expiry, nor are prices in any way conducive to combinations or pairings.  A steep decline is imminent.

The above is the cheapest, safest means of profiting from EXPO’s coming slide.

Breakeven arrives at $113.14 – a decline of 1.6% from the stock’s current level.

Maximum gain is unlimited.

Maximum loss is $6.86 (Difference between long CALL strike and short price plus cost of long CALL).

The King is in the field.  Rosh Chodesh Elul.  Speak to Him.  The time is here.

With kind regards,

Hugh L. O’Haynew

 

3 responses to “Exponential Gains Leading Invariably to SOUL-CRUSHING Declines (EXPO)”

  1. john says:

    on the expo trade….how is profit potential unlimited?? stock can only go to zero. noticed this on other trades as well. unlimited on a % basis but not on a $ basis?

    thanks

  2. Hugh L. O'Haynew says:

    bs’d
    Right you are, John.
    We’re using the lazy options trader’s understanding of ‘theoretically unlimited.’
    That is, when a long PUT’s underlying goes to zero or a long CALL’s underlying goes to infinity (both of which are ‘theoretically’ possible, though in practice, never actually happen), the jargon term used is ‘unlimited’.
    Technically, though, only the CALL holder can genuinely boast that theoretical potential.
    All the best, brother.
    May you ever find favor in the eyes of the Al-mighty.
    Huey

Leave a Reply

Your email address will not be published.