Friday, December 17, 2010

ENTR Watch

Home-entertainment electronics company Entropic Communications Inc. (ENTR), added this week to the earnings-play list, has moved to bear phase on Person's Proprietary Signal (pps) and the parabolic sar with a decline below the trading range of the last three days. Earnings will be announced on Jan. 31.

ppspsarmacd obvh-a trend ma20ma50ma200
ENTR $10.88

The phase switch comes two days after analyst happy talk, which in turn came two days after the stock hit an all-time high and then declined sharply the same day. Perversity squared. That's Entropic.

With a 21.3% return on equity, no debt to speak of and 98% institutional ownership, there's a lot to like about ENTR's finances. Revenue growth took a nasty hit in 2009, but the quarterlies have been rising steadily for four quarters, suggesting that the company is back on track for 2010.

Even so, the sharp drop off the high, inexplicable in light of the analyst happy talk, is troubling, more for the mystery than for raising a warning flag.

Of the three principal signalers, only the macd remains in bull phase, and it is declining toward the zero line and a phase switch.

On the Person's chart, ENTR is trading midway between the weekly midline and the lower pivot.

Person's Table
ppspps openupper pivotlower pivot
ENTR $10.88 $11.08 dec17 $13.14 +20.8% $10.54 -3.1%

Although today's decline carried the stock below the recent trading range, at three days it wasn't much of a range. The 20-day moving average and a lengthy pause surrounding the swing low before the current run-up are significant support levels.

Reversal Levels
  • $12.10, +11.2% (all-time high)
  • $10.88 --- You are here.
  • $10.08, -7.4% (20-day moving average)
  • $8.07, -25.8% (swing low)

The stock has beat analysts' forecasts seven out of the last eight quarters. The price has either risen or stayed put each time. So the pattern meets my expectations for an earnings play, but in a half-hearted sort of way. I much prefer to see earnings surprises rewarded with enthusiastic price increases.

Given the mystery of the price drop, the lackadaisical response to earnings surprises and the revenue decline of 2009, I would approach ENTR with caution. If I already owned a position (I don't), I would be inclined to exit now and wait for a return to bull phase as a re-entry signal.

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.
  • obv - On-Balance Volume.
  • pps - Person's Proprietary Signal.
  • psar - Parabolic Stop and Reverse
  • ma20 - 20-day moving average
  • ma50 - 50-day moving average
  • ma200 - 200-day moving average
  • macd - Moving Average Convergence-Divergence

About the glance: The colors indicate the state of each signal.
  • Signal Section:
    • pps, psar, macd: green for bull mode, red for bear.
  • Confirmation Section:
    • obv: green for uptrending, red for downtrending.
    • h-a trend: green for uptrending, red for downtrending.
  • Environment Section:
    • ma20, ma50, ma200: green for above the average, red for below the average.

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