Tuesday, October 26, 2010

IDCC Watch

The digital wireless tech company InterDigital Inc. (IDCC) has moved to bull phase on Person's Proprietary Signal (pps), setting a higher price high in a runup that began a year ago. Earnings will be announced after the close on Wednesday.

IDCC $30.80

The phase switch brings all of the technical tools into bullish unanimity.

But then, there are those pesky earnings.

IDCC has an 83% return on equity -- really good -- but revenues have been down the past two quarters, and annual revenues were hit hard by the recession, although they recovered strongly in 2009.

The company has no debt to speak of, so it is strongly positioned to take advantage of the recovery.

The question, however, is one for the short-term: Get in now, before earnings, and risk a negative surprise? Or, stay out past earnings, and possibly miss an opportunity.

On the Person's chart, two days of rising prices have brought IDCC to the second upper weekly pivot -- it broke through this morning, and then dropped back to near the pivot level.

Person's Table
ppspps openupper pivotlower pivot
IDCC $30.80 $29.99 oct25 $30.83 +0.1% $29.25 -5.0%

Today's swing high marks the upside resistance., a higher high in the runup since Aug. 30.

Reversal Levels
  • $31.09, +0.9% (swing high)
  • $30.80 --- You are here.
  • $29.76, -3.4% (20-day moving averager)
  • $29.08, -5.6% (swing low)
  • $26.82, -12.9%

For long-term trading, the 50-day moving average has been tracking closely to the 200-day moving average, tossing off four signals in the past two months. The most recent, a bull signal, happened Sept. 24, and the 50-day moving average has been uptrending at a steeper angle then with past bull signals.

Slow Trading
IDCC $26.81 $27.70

On Oct. 14 I wrote: "I like IDCC above the $30.67 resistance level." Well, we are there, and yet, I'm conflicted.

Bottom line:

I don't have a position on IDCC, so the question is whether I should enter or not this close to earnings. To me, it feels very much like a roll of the dice.

Yet I like the fundamentals, despite the ambiguity of revenues trends, and I like the 55% institutional ownership. So if it's a crap shoot, then arguably it's with loaded dice, weighted in my bullish favor.

My decision for my account is to get in before earnings, and jackrabbit like crazy if the earnings go against me. I'll deal with the risk by sizing my position on the small side.

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.

  • h-a trend - Heikin-Ashi trend.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence
  • sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.
  • h-a trend: Determined by the Heikin-Ashi candlestick, green for up, red for down. Heikin-Ashi averages six days for high, low and close, signalling uptrend if the close is in the upper half of the range and downtrend if it is in the lower half.
  • sto: green for bull, red for bear.
  • sto zone: green for overbought (80+), red for oversold (20-), yellow for neutral zone
  • psar, pps, macd: green for bull mode, red for bear.
  • macd trend: green for rising, yellow for sideways, red for falling.
  • neutral.
  • ma20, ma200: green for above the average by more than 1%, red for below the average by more than 1%, yellow for within 1% either side of the average.

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