SPRD Watch

The semiconductor manufacturer Spreadtrum Communications Inc. (SPRD) has moved into a downtrend. An uptrend that began July 29 at $12.80 ended on Sept. 20 at $22.39, a gain of 75%.

sym	phase	trend	adx		200/50	40/10
SPRD			46

The decline has moved the price below the 23.6% Fibonacci retracement level at $20.13. The next significant Fib levels are:

• 38.2% - $18.73
• 50.0% - $17.60
• 61.8% - $16.46

The first signficant price resistance -- a two-day pullback in early September -- is at about the 50% Fib retracement level.

The lower boundary of the 20-day Donchian price channel is about at the 61.8% Fib retracement level, but it is rising, and should SPRD drop that far, it is likely to move into bear phase before reaching that most significant level in the Fibonacci analysis.

I hold SPRD as an October in-the-money covered call with a strike price of $17. My best return comes if the option isn't exercised. So if the price rises above the $23.6% retracement level, I'll buy a deep out-of-the-money call (delta between 15 and 25) for insurance, or if it falls below the 38.2%, I'll buy a protective put.

Key

• phase: 20-day price channel phase, with green for bull trend, red for bear trend and yellow for neutral trend.
• trend: Price direction, green for higher highs and higher lows, red for lower highs and lower lows, yellow for neither.
• adx: Average directional index location, indicating the strength, or the temperature, of the trend. Orange for 40 or greater, aqua (light blue) for 25 and up but below 40, magenta (light purple) for 20 and up but below 25, and brown for anything below 20. (Mnemonic: Orange for the overhead sun, blue for the surrounding sky, magenta for sunset on the horizon and brown for the earth.)
• 200/50: The moving average cross, green for the 50-day ma above the 200, red for below and yellow for closely aligned.
• 40/10: The moving average cross, green for the 10-day ma above the 40, red for below and yellow for closely aligned.

About my trading methods

Read a detailed explanation of my analysis method, including trading rules.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and 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.

The trader’s greatest sin is inaction. Sleeper, awake! Seize the Nietzchean moment. Roll out of bed and trade.