The Elliott wave count shows that SYMC remains in a downtrend.
SYMC shares rose by 1.1% over the 45-day lifespan of the position, or 9.2% annualized. My options had a negative yield on risk of 307.1%, or 2,491,3% annualized.
Click on chart to enlarge.
 |
| SYMC 3 years 3-day bars |
Update 2/3/2014: SYMC continued its downward course throughout the day and I've opened a bear position, structuring it as a synthetic short future, built from long puts and short calls with identical strike prices, at the money and expriring in July.
Symantech Corp. (SYMC) began its present decline from $27.10 on Aug. 8, 2013. It corrected to the upside, beginning Oct. 23, 2013, zig-zagging from $20.89 to a peak of $24.27 on Jan. 29.
From that point, the price began a steep decline that produced a bear signal on Friday as it passed below the lower boundary of the 20-day price channel.
It has already satisfied its minimum potential decline and I'm unable to estimate how much further downside potential remains, if any.
The Chart
I've counted SYMC as being in a very long-term downward trend from its peak of $34.05 on Dec. 9, 2004.
Trends occur in five waves under the Elliott wave rules. SYMC completed the wave 2 {+4} upside correction on Aug. 8, 2013, giving way to the wave 3 {+4} decline, the middle wave of the pattern that began in 2004.
It is still too early in wave 3 {+4} to say with any accuracy what the relative degree of its subwaves are. I've counted them as being four degrees below, labeling them as the base degree. That degree has completed most of its run, with the wave 4 upside correction ending at $24.2 on Jan. 29.
It is presently in the first wave, 1 {-1} of wave 5.
Click on chart to enlarge.
 |
| SYMC 5 years weekly bars (left), 180 days 4-hour bars (right) |
The end of wave 1 {-1} will mark the beginning of a lower magnitude correction of the decline from Jan. 29.
The chart poses two important questions at this point: How far down is wave 5 likely to travel and how high might the wave 2 {-1} go.
Under the Elliott rules, wave 5 at a minimum must move below the end of wave 3, at $20.89, and it did so today.
Once that level is pierced, there is no rule that allows me to set a target for wave 5. The best I can do is to say that wave 3 {+4}, which also began on Aug. 8, 2013, will eventually move below the terminus of wave 1 {+4}, which is $12.04 set on Aug. 16, 2010. It will, however, most likely take a long time to get there.
The wave 2 {-1} correction to the upside, when it beging, will take back a portion of the decline from $24.27. Corrections often end at the major Fibonacci retracement points, which would be 38.2%, or 50%, or 61.8% above the end of the current wave 1 {-1}.
Elliott wave rules are fairly terrible about setting targets. My take-away is that it is a bearish chart. I'll rely on my own chart analysis and Turtle-trading based rules to manage my exit if and when the time comes.
Odds and Yields
SYMC has been prone to whipsaws when it has sent bear signals since the present wave 3 {+4} to the downside began last August.
The present bear signal is the fourth of that wave. Of the three completed signals, one was successful, yielding 1.1% over 32 days, and two were failures, losing on average 9% over 13 days. Altogether, they have produced a negative 7.9% win/lose yield spread.
There is nothing to like about those odds and yields.
The Company
Symantech, headquartered in Mountain View, California, produces a range of products to provide security for computer systems. They are best known to the public for their Norton anti-virus software. It is also a major player in corporate data security and cloud storage.
Analysts collectively come down at a negative 6% enthusiasm rating for Symantech, not bad but not great, either.
The company's current financials are far more optimistic than the analyst ratings would imply. Return on equity is 22% and debt is on the low side, amounting to 36% of equity.
Looking at the last 12 quarters, the company has been consistently profitable, with earnings per share rising gently over time.
There has been but one downside surprise in that period, back in 2012. All the other quarrters have surprised to the upside.
The earnings yield is 5.41%, higher than 66% of other software and programming companies. The quarterly dividend payout is 2.88% annualized at today's prices.
The stock is selling at 18-1/2 times earnings. It takes $2.16 in shares to control a dollar in sales.
Institutions own 91% of shares.
Symantech next publishes earnings on May 5. The stock goes ex-dividend Feb. 20 for a payout of 15 cents per share.
Liquidity and Volatility
Implied volatility stands at 29%, at the 42nd percentile of the annual range. Volatility has fallen from 39% on Jan. 27 and has risen over the past two trading days.
Volatility in that middle range is best traded on the bear side as short shares or synthetic short futures built out of options.
Contracts are trading a bit slowly today, with calls running at 79% of their five-day average volume and puts at only 17% of average.
Decision for My Account
I intend to open a bear position in SYMC if downside momentum continues in the half hour before the closing bell. I'll structure it as synthetic short futues, which mimic short shares.
If momentum falters, then I'll park SYMC on my Watchlist and wait for an opportunity to enter.
References
My shorter-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.
I use the number 68.2% in using applied volatility to calculate the expected trading range. 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.
Elliott wave analysis tracks patterns in price movements. The principal practitioner of Elliott wave analysis is Robert Prechter at Elliott Wave International. His book, Elliott Wave Principle, is a must-read for people interested in this form of analysis, as is his most recent publication, Visual Guide to Elliott Wave Trading.
Several web sites summarize Elliott wave theory, among them, Investopedia, StockCharts and Wikipedia.
See my post "Chart Analysis: Nomenclature" for an explanation of my method for labeling waves on the chart.
By preference I place my trades in the last half hour before the closing bell in New York. See my essay "When is the best time to trade" for a discussion of the practice.
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.
No comments:
Post a Comment