KLAC Watch

KLA-Tencor Corp. (KLAC) makes equipment that helps chip makers make chips and nanoelectronics makers make nanos (or something like that). The stock is trading more than 3% above Friday's close with volume up a lot for the third trading day in a row.

	trend	adx	psar	pps	macd	macd trend	sto	sto trend
KLAC $31.78

Today's volume, with an hour left before the close, is 27% above Friday's, and 75% above Thursday's.

The signals all point bullishly (except for the trend of the fast stochastic, which is pointing down, but that signaler is so volatile I tend to treat it as a secondary tool).

The more important task, beyond the bullishness in front of our faces, is to try to puzzle out the trend.

Over the past year KLAC has hit a high of $37.71, in October 20089, and then two more swing highs, each a bit lower than the predecessor, accompanied by lower lows. Aha! Bear trend, you say, in a flash of recognition.

And you would be right right, but the whole look and feel of the structure on the chart is so sidewinderish, that I have a hard time thinking of it as downtrend. This could be a case of human visual perception clouding the mind. We make up patterns every day, as anyone who has spent a summer afternoon cloud-watching knows.

And the last lower low actually was a higher low, by 2¢, which seems so insignificant.

The volume spikes for this stock have all mainly come on the down days, but since the start of June the up days have been showing higher volume, a possible clue.

Reversal Levels

• $36.07, +13.5%
• $33.25, +4.6%
• $32.30, +1.6%
• $31.78 <== You are here.
• $27.72, -12.8%

The question with this stock is will it reverse before topping $36.07. If it does, then the sideways move or downtrend is continuing. if it breaks persistently above that level, then an uptrend may be forming.

I like this stock as a short-term bull position in order to capture some of the run-up to $36.07, which is 13%+ away. I also like it as a sideways play (as with an iron condor options position), with the upper limit of maximum profit at $35 or $40, and the lower limit at $30.

Earnings will be announced July 22 after the close. KLAC pays a quarterly dividend, and net income per share has been up nicely each of the past three quarters.

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Disclaimer

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Abbreviations:

• psar - Parabolic Stop and Reverse
• adx - Average Directional Index
• pps - Person's Proprietary Signal
• ma20 - 20-day moving average
• macd - Moving Average Convergence-Divergence
• sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways
• adx: orange for above 30-up, blue for 20-down, purple for in the middle. Red is most prone to whipsaws
• psar, pps, macd: green for bull mode, red for bear
• sto: green for overbought, red for oversold, yellow for the neutral zone.