JAKKS Pacific - The Market Has Spoken (JAKK)

Congratulations to JAKKS Pacific, Inc. (NASDAQ:JAKK) for doing better than expected last quarter. Unfortunately, given the behavior of JAKK shares since this morning's announcement, it may not have mattered how well the organization performed in the third quarter of this year - the bears look like they were planning to ambush JAKKS Pacific no matter what the company reported today. And, that's a major clue nobody can afford to ignore.

Just to set the stage, JAKK jumped nearly 12% at the open this morning, with Thursday's first trade rolling in at $8.90 versus Wednesday's closing price of $7.96. It took less than one minute for the selling/profit-taking to begin. And once it kicked in, it kicked in in spades. JAKKS Pacific, Inc. shares were last traded at $7.33 apiece, down 7.9% for the day. That's a 20% intraday swing.

It's also a major red flag for current JAKK owners, as we've seen this kind of sudden - and harsh - turn for the worst before. Once this ball gets rolling, it can keep rolling for a while. Case in point? The July 23rd tumble. The trend was bullish leading up to that point, but the earnings reaction that day drove a 13.7% loss for that one day, but the bears kept digging in until six days later when the stock hit a low of $6.23... a 24% slide.

And that was hardly the first time the JAKK bears took the ball and ran with it.

Today's wild swing, though, is particularly alarming for a reason other than its size - it's an outside day reversal, where this bar's open and close range (so far) completely engulfs yesterday's bar. It's evidence of a major change of heart, and in this case, likely indicates that most traders were thinking bearishly to begin with, and the strong profit-taking opportunity that presented itself this morning was more than enough to jolt the would-be sellers into action. Problem is, it's probable that only a portion of the bearish-thinking JAKK shareholders have made their way to the exit yet.

Bottom line? As compelling as the quarterly results were, the hand that investors' tipped with JAKKS Pacific, Inc. shares today is even more compelling.... in the other direction. While there's a smidgen of a chance the 100-day and 200-day moving average lines that have halted the decline so far could turn into a major floor, that's a long shot based on hope. The market has spoken, and it just doesn't trust JAKK despite the rhetoric that may be floating around today.

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