Spike's Scientific Stock Analysis

[DSteckler]

DSS is presenting Thursday at the Needham Growth conference.

[sekto]

lol i didnt even see the ascending triangle. I was just looking for stocks near the bottom channel of the linear regression and this looked real good for a nice 10-15 cent gain. Thanks for the help bro.. So what would be a good entry point in you opinion ?
Im thinking 3.10, how would u play this?

[RL]

Spike I plan on buying QCOM tomorrow any thoughts?

[DSteckler]

<< Definitely an ascending triangle formation >>

More of a rising wedge pattern than an ascending right triangle, Ski. You clipped the highs and lows of several data points.

http://www.ttrader.com/mycharts/display.php?p=38173&u=dave&a=MyCharts&id=690

Rising wedge patterns that form after a downtrend tend to break out to the downside. The 12-month ROE = -2.19% and earnings estimates for the upcoming quarter are -40% vs. year ago. Institutional holders own 88% of the float, so it's questionable as to who is left to start buying the stock in earnest.

OTOH, upside breakouts are treated just like any triangle breakout so take the width of the wedge at its widest point and add that to the pivot price: 3.20 - 2.62 = .58; add that to 3.30 (the pivot) for a target of 3.88. That's about a 17.5% gain from the pivot price.

The daily chart since 10/31 has been holding the 50DMA as support so that's a plus. The daily ADX closed Friday at 18.96 so we want to look at oscillating indicators (see my post from Saturday on this topic) like stochastic or RSI. The daily stochastic (I use 8-3-3 for my inputs) bottomed out above 20 (which is bullish) and has started moving higher. The RSI hasn't been below 44 for months, which is also bullish.

[skiracer]

lol i didnt even see the ascending triangle. I was just looking for stocks near the bottom channel of the linear regression and this looked real good for a nice 10-15 cent gain. Thanks for the help bro.. So what would be a good entry point in you opinion ?
Im thinking 3.10, how would u play this?

I would wait until at least 10 am to see what's going on with it. I like this particular formation alot and the chances of a failure of a breakout from the ascending triangle at this point are low I would buy it at anywhere from $3.03 to $3.10 if it hasn't gone past $3.10 at 10 am. If after 10 am it is $3.10 or so I would buy it at that point. If per chance it drops and holds the drop after 10 am I would wait to see what takes place intraday. I think this stock is getting close to breaking above the horizontal line of the triangle. It might just make a big move Monday morning so watch it from the open if you can.

[spikefader]

Hey sekto,

Looks like it's got real potential doesn't it! Gonna stalk it myself, so thanks for the heads up.

For a few reasons (choppy nature in the face of good money flow, the recent tendancy for channel turn ups to get sold, and weakness despite a strong broader market) I'd not be aggressive with this one, but think I'll look to bid low (probably conservatively around 2.94), target 4.00 (36%), and keep a 2% stop on it. That's r/r of 18, which is great.

Looking at the chart, you've got an inside day that broke up on Friday. The larger triangle ski mentioned looks nice. Vol by price support at these levels. No real channel resistance until about 4.00, so nice setup.

Good luck with any play you make.

[spikefader]

Spike I plan on buying QCOM tomorrow any thoughts?

Well it's definately bullish bias. Ya got the recent island reversal, runaway gap, triangle breakout, bullish market. I'd be looking at min of 50.00, max of 70.00 targets.

But it sure is an aggressive entry, and I see some resistance 48.50ish, so I'm not sure I see the r/r there....I might be a bidder at 46.60 for the support play though.....better r/r then...

Good luck!

[spikefader]

[skiracer]

<< Definitely an ascending triangle formation >>

More of a rising wedge pattern than an ascending right triangle, Ski. You clipped the highs and lows of several data points.

http://www.ttrader.com/mycharts/display.php?p=38173&u=dave&a=MyCharts&id=690

Rising wedge patterns that form after a downtrend tend to break out to the downside. The 12-month ROE = -2.19% and earnings estimates for the upcoming quarter are -40% vs. year ago. Institutional holders own 88% of the float, so it's questionable as to who is left to start buying the stock in earnest.

OTOH, upside breakouts are treated just like any triangle breakout so take the width of the wedge at its widest point and add that to the pivot price: 3.20 - 2.62 = .58; add that to 3.30 (the pivot) for a target of 3.88. That's about a 17.5% gain from the pivot price.

The daily chart since 10/31 has been holding the 50DMA as support so that's a plus. The daily ADX closed Friday at 18.96 so we want to look at oscillating indicators (see my post from Saturday on this topic) like stochastic or RSI. The daily stochastic (I use 8-3-3 for my inputs) bottomed out above 20 (which is bullish) and has started moving higher. The RSI hasn't been below 44 for months, which is also bullish.

Dave,
I can see that we're going to have to present our stands somewhat more broadly. Great write-up and all valid points. I did look at some of the fundamentals along with the technicals. You could present a case for a rising wedge formation an you may be right. I guess that's what makes a horse race. I'm sure a dozen people would have close to a dozen different interpretations of the chart. It seems that except for the rising wedge vs the ascending triangle formations you agree with me that there is alot of potential with this issue. Another way to look at the 88 % institutional holding of the available float is that they bought in on the assumption that this is a good investment an is going to appreciate in price. Most of that buying took place early on in the light of negative earnings and ROI which leads me to believe they are on to something. In all honesty to you I didn't really look at the eps or the ROI in this case but I did look at the institutional ownership, and mentioned the CMF and the OBV in my previous post.
I use a web address that provides a pivot point calculator where you plug in the high, low, close for the last trading day an it spits out pivot points and support levels. This is what is gave me on DSS:
Pivots: 1st. 3.10; 2nd. 3.08; 3rd. 3.05
support levels: 1st. 3.00; 2nd. 2.98; 3rd. 2.95
I use this calculator everyday on any number of possible setups I'm looking at and I've found it to be pretty precise. Again strictly interpretation.
Great give and take on the issues. I think it's great when people can do this without any of the egocentric BS that typically interferes with opposing dialogue. Of course the final outcome is the proof of the pudding so to speak. Hopefully we're both on the right side of this one if we even take a position. I like the looks of the chart from strictly a technical basis and will be looking for an entry this morning if it meets what I'm looking for. I usually will not buy anything before 10 am after I see any gaps up or down an if they are going to hold. Good trading. Ed

[Runner]

I’ll have to agree with Dave on the rising wedge on DSS. I’m seeing this (rising wedge) on other charts. I even think the COMPQX is forming this pattern as well. I thought at first it was an ascending triangle but it is not. Pull up a weekly and monthly chart of the COMPQ and you’ll see it does qualify as a rising wedge. This flags a caution flag for me/

Here is monthly COMPQ

[RL]

Spike thanks much for your analysis

[skiracer]

I’ll have to agree with Dave on the rising wedge on DSS. I’m seeing this (rising wedge) on other charts. I even think the COMPQX is forming this pattern as well. I thought at first it was an ascending triangle but it is not. Pull up a weekly and monthly chart of the COMPQ and you’ll see it does qualify as a rising wedge. This flags a caution flag for me/

Here is monthly COMPQ

Runner,
Regarding DSS. It's pretty close depending on how picky you want to be with one of two of the tails on those candles. Anyone can draw those horizontal lines anyway they want depending on what they are trying to show. The same with trendlines. 6 people will have 6 different interpretations. I agree with both you an Dave that it could be a rising wedge which would change the analysis on what the stock may or may not do or how it will perform over these next few days. At best all of this is conjecture an educated guesses. Personally I think it is so close that I'm seeing it as an ascending triangle. I really like the chart formation and will be looking for an entry this AM regardless of the different interpretations. As always the bottom line is how the position will or does perform. As always I'll be placing a stop somehwere between 5 to 7 % below my entry if it does trigger. Again it might be a rising wedge an everyone is certainly entitled to voice how they see it. I would hate to miss out on what looks to be an inviting opportunity and setup on such a slight variation on the theme. Good luck guys no matter how you play it if you do play it. Ed

[DSteckler]

<< Anyone can draw those horizontal lines anyway they want depending on what they are trying to show. The same with trendlines. >>

Not really. True, anyone can draw any trendline they want but to have validity for predictive purposes, there are right and wrong ways to draw a trendline. A proper method for constructing trendlines was written up by David Penn in the January 2006 issue of TASC magazine.

[skiracer]

<< Anyone can draw those horizontal lines anyway they want depending on what they are trying to show. The same with trendlines. >>

Not really. True, anyone can draw any trendline they want but to have validity for predictive purposes, there are right and wrong ways to draw a trendline. A proper method for constructing trendlines was written up by David Penn in the January 2006 issue of TASC magazine.

Dave,
I know there are proper and improper ways to do everything. Depending on your slant or perspective on what you're looking at plus your purpose or reason for seeing it a specific way, everyone will apply a certain amount of "poetic license" to any analysis including both you an I whether it's done purposely or unknowingly. It's only human nature. Whether or not you hit the exact tip of a candles tail or miss one will always make for opposing views. The bottom line is always in the performance of the stock which none of have any control over. But I'm always open to another opinion and certainly learning a new technique for doing anything that will benefit my trading is a good thing. You should scan and post that article or excerpts from it on the specific points that your talking about for the benefit of all of us. I would definitely enjoy reading it. Ed

[DSteckler]

<< You should scan and post that article or excerpts from it on the specific points that your talking about >>

Penn's article is only available in print since it was just published a few weeks ago. Vic Sperendeo ("Trader Vic") wrote about the proper method for constructing trendlines in his 1991 book, "Trader Vic: Methods of a Wall Street Master." He wrote:

[For an uptrend] draw a line from the lowest low, up and to the highest minor low point preceding the highest high so that the line does not pass through prices in between the two low points. Extend the line upwards past the highest high point."

For a downtrend, draw a line from the highest high, down and to the lowest minor high before the lowest low so that the lines does not pass through prices in between the two high points.