The stock declined by 0.1% from initial entry during the period I held the position. I added to the position three times, and the stock fell 3.8% from my basis.
I structured the position as hedged and leveraged short vertical option spreads, which had a negative 9.2% yield on risk.
Qlik Technologies Inc. (QLIK) has set its second consecutive higher high in an uptrend that began from $16.71 in mid-November 2012 and has carried up to a high Friday of $29.26. The uptrend confirmation coincided with a break above the 20-day price channel's upper boundary, $29.26, that sent a bull signal on the stock.
QLIK went public in July 2010, opening at $12. From there it rose to a high of $35.62 in July 2011 before embarking on the downtrend that ended last November and that was reversed by the present rise.
The stock has sent two bull signals since the current trend began, both of them successful, with an average return on 7%.
Qlik Technologies, headquartered in Radnor, Pennsylvania, defines itself as delivering "user-based business intelligence" to 28,000 customers in 100 countries. Its premier service is the QlikView Business Discovery Platform.
Qlik Tech doesn't use the term "data mining" in its short-form product description, but that seems to be what the software is all about -- aggregating data from a variety of sources and formats, analyzing it, and displaying the results in ways that businesses can use to support decision making.
Analysts are favorable to the company, giving it a 33% enthusiasm index, a degree of happy feeling unsupported by the financials. Qlik Tech reports a pathetic 1% return on equity. To balance that, the good news is that the company has no long-term debt.
Qlik Tech has had three losses out of the past 11 quarters, the worst being the most recent, the 1st quarter of 2013. It followed hard on the heels of the most profitable quarter, the 4th of 2012. The 4th has consistently been highest earner since Qlik Tech went public, and it has been accelerating .
Earnings have surprised to the upside five times, and to the downside six.
Institutions own nearly all of the shares, and the price has been bid up to quite a high level. It takes $6.20 in shares to control a dollar in sales. That tells me that QLIK is a hope-and-dreams stock at this point rather than a solid performer. It adds a speculative gloss to any position.
QLIK on average trades 1.9 million shares a day and supports a wide range of option strike prices, with open interest in the three- and four-figure range and a fairly narrow 4.6% spread on front-month at-the-money calls.
Implied volatility is high, at 49%, just below the midpoint of the six-month range. It has been trending sideways since late April.
Options are pricing in confidence that 68.2% of trades will fall between $24.77 and $32.97 over the next month, for a potential gain or loss of 14.2%, and between $26.90 and $30.84 over the next week.
Options are trading heavily, with puts having a slight edge at 182% over the five-day average volume, compared to 143% over overage for calls.
The fair-price zone on today's 30-minute chart runs from $28.23 to $28.72, encompassing 68.2% of transactions surrounding the most-traded price, $28.32. QLIK moved above the zone in the third hour of trading and remains there as I write, three hours before the closing bell.
Qlik Tech next publishes earnings on July 22.
Decision for my account: I'm not enthusiastic about the financials, but then, that's not how I trade. The chart is good and the high volatility provides a nice opportunity for profit. I'm opened a bull position in QLIK, structuring it as a vertical credit spread expiring in June, long the 27 put and short the 25 put. The position gives me a 9.2% cushion between my entry price and the break-even at expiration. The potential maximum yield is 21.6%.
References
My trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.
At several points in my analysis I use the number 68.2%. This comes from statistics and refers to the one standard deviation boundaries, which are expected to contain 68.2% of whatever is being studied. Putting it another way, given an item (a trade or whatever), there is a 68.2% chance that it will appear within those boundaries.
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.
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