Ammo, Inc (NASDAQ:POWW) was trading about 3% lower on Monday as it headed into its third-quarter 2022 earnings print, scheduled to be released after Monday's market close.
Traders and investors will be watching to see if the vertically integrated producer of ammunition and components has been able to increase its revenues to the level it guided on Feb. 1. On that date, Ammo said it expected quarterly revenue of approximately $64.5 million, which would represent an estimated 288% year-over-year increase compared to $16.6 million in Q3 FY21.
When Ammo printed its second-quarter revenue beat on Nov. 15, the stock opened higher the following trading day but sold off over 10% intraday, which set Ammo into a months-long downward spiral that brought it to a 52-week low of $3.95 on Jan. 24.
Ammo has rebounded over the past few weeks, reversing course into an uptrend, and on Monday looked to be possibly preparing to print its next higher low on Tuesday.
From a technical analysis perspective, Ammo’s stock looks set to climb higher over the next few days, but it should be noted that 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 institutions writing the options increase premiums to account for implied volatility.
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The Ammo Chart: If Ammo closes the trading session near its low-of-day, it will form a bearish engulfing candlestick on the daily chart, which indicates lower prices may come on Tuesday. If the lower price remains above the most recent higher low at the Feb. 3 low-of-day price of $4.16, however, it is likely to pop up over the Feb. 9 higher high and the $5.12 level.
The move lower on Monday was on lower-than-average volume, which indicates consolidation as opposed to the bears taking control. As of late afternoon, only 1.63 million shares of Ammo had exchanged hands, compared to the 10-day average of 2.03 million. This is a good sign for the bulls, as a move lower on low volume is more bullish than a stock falling on high volume.
On Monday, Ammo was testing the eight-day exponential moving average (EMA) as support and holding above it. Over the past two trading days, the stock has attempted to regain the 21-day EMA as support and rejected it, which may concern bullish traders. Ideally, the bulls want to see Ammo regain the area as support and continue to trade above the level to eventually cause the eight-day EMA to cross above the 21-day, which would be bullish.
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- Bulls want to see a bullish reaction to Ammo’s earnings print bringing high bullish volume to drive the stock up over the 21-day EMA. There is resistance above at $4.70 and $5.50.
- Bears want to see a bearish reaction to the stock’s earnings bring Ammo down below the Feb. 3 low to negate the uptrend. The stock has a key support level at $4 and below the area there is further support at $3.21.
