Dell Punished the Most in 11 Years on Earnings Miss

Published on Wednesday, 23 May 2012 17:03 Written by David Becker

New York, May 23^rd  (TradersHuddle.com) –   Dell (NASDAQ: DELL) was hammered on the open, after reporting earnings that were worse than expected.  The stock was a catalyst for the decline in the broader markets along with fear over a Greek default.  Dell reported that it earned 43 cents per share in the latest quarter. Revenue fell 4 percent, to $14.42 billion from $15.02 billion. Analysts had expected a profit of 46 cents per share on $14.91 billion in revenue.  Additionally, the company lowered guidance saying it expects revenue to rise 2 percent to 4 percent from first-quarter levels, which implies a total of $14.71 billion to $15 billion. Analysts expected $15.44 billion in sales.

Price action created a gap lower, which generating continued selling pressure for the majority of Wednesday trading session.  Dell blew through weekly supports levels at $14.30 and $13.0 dollars moving lower by 14%.  The next levels of support for the stock are $12.0 and $11.50.  Short term support is seen near former resistance near $13 dollar per share.  Dell will likely test the top end of the gap near $14.50 at some time in the near future.

The RSI (relative strength index) which measure over-bought and over-sold levels, printed near 13 which is the lowest daily level in the past year.  The weekly RSI is printing at 28 which is the lowest level in the past 3 years.

Momentum on the stock is severely negative, with the MACD reaching -.4 which equals the lowest levels on the index seen in 12-months.  The MACD (moving average convergence divergence index) created a sell signal in mid-April when the spread (12-day moving average minus the 26-day moving average) crossed below the 9-day moving average of the spread.