“Wall Street likes to overreact, and I believe it’s overreacting to DXCM right now.”

Bryan Bottarelli, Head Trade Tactician, Monument Traders Alliance

This week is a monster one for earnings.

With so many companies reporting, I’ll be looking to pinpoint the best overnight earnings candidates in The War Room.

But that’s not all I’m looking at.

I’m also searching for textbook market overreactions.

And I believe I found one in Dexcom (DXCM).

You see… Wall Street likes to overreact to things, and I believe it’s overreacting to DXCM right now.

Here’s why…

Last week, the diabetes glucose monitor maker released third-quarter results that beat expectations. However, the stock dropped due to slower-than-expected revenue growth.

Revenue increased 2% from $975 million a year earlier. At first, shares fell -9% on the news, but then, as the markets open – shares completely recovered. Dexcom also announced its Chief Commercial Officer Teri Lawver will retire at the end of the year, so that leadership change could’ve also played a role in the dip as well.

To me, Dexcom’s dip indicates the bulls are willing to support the stock around these levels – and on any further pullbacks – so I could move into longer-dated calls to continue playing the Gift Gap move.

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Action Plan: Based on the earnings reaction that we saw last week, I have a good feeling DXCM is nearing the bottom. Which is why I’ll be looking to buy the dip on DXCM in The War Room this week.

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