TrinQuint Semi-Conductor: Volatility Spike Play.

Shares of TrinQuint Semi-Conductors (TQNT) tumbled 26% today during trading, due to a failure to beat Wall Street earnings expectations, and had a negative growth forecast due to Apple scaling back on orders for their computer hardware parts. TQNT supplies chips for Apple, the bulk of their business is done with Apple. For more here is the story. http://www.marketwatch.com/story/triquint-announces-third-quarter-2011-results-2011-10-26

 

Regardless, my trading fund has a Relative Value Volatility Arbitrage aspect to it, so anytime i see a equity get hit real hard real fast on a rapid negative volume spike, it comes up on my radar as a possible share price bounce play.

 

 

 

What we can see on the chart above is TQNT was in a long term giant Head & Shoulders chart pattern, and in early October it finally bottomed out and began a new trend upwards. What happened last night was a event driven, fear induced panic, that made people all blow out simultaneously. In reality a 10-15% pull back would have been a understandable behavioral reaction.....but 26%? Definitely way to oversold.

 

What we can see is:

• Massive sell off occurred on high volume. Generally after a giant down day like this, many traders and investors will come up and snag a bunch of shares at a discount price (in their mind) and will help retrace some of the losses from the prior trading session.
• Volatility: Any 30% price move in one day, will eventually lead to a mean reversion to moving averages or linear regression lines. This event is not that serious that it wont recover from this behavioral sell off.
• The Professionals: Best believe Market Makers, Hedge Fund Managers, Professional Equity Traders will come in and accumulate this stock for a easy 10-15% pop upwards in the next coming weeks. 

 

 

Above:  Linear Regression Analysis.

• Above we can see that TQNT is trading well below its linear regression levels by at least .45 cents a share. We can fully expect to see a reversion to that mean of 5.80 within a few weeks at the latest.
• 60 day Lin-Reg line is at $5.80 Per Share
• 30 day Lin-Reg line & Lin-MA is at $7 Per Share

Above: Mean Reversion Analysis Using Simple Moving Averages

• All moving averages suggest a reversion back to the mean target range of $6.25 Per Share on a monthly basis & $7.00 Per Share on a Weekly Basis.
• Realistically longer ranging Moving Averages are more accurate after short term event fluctuations.

In the end TQNT may have some issues, but its appears to be very oversold at this point, i believe it bouncing back to 6.50-7 within a month is not a unreasonable assumption and should come to fruition. But with the market acting the way it is nowadays, anything can happen.

Position: Long TQNT

Hyper Dynamics Corp: Break-out Deja Vu?

Hyper Dynamics (HDY) has recently been flagged by multiple signals from my system as a possible pre-breakout phase, consolidated equity. We have been down this road before with this equity, it proves to be profitable time and time again, and its the same pattern we see now that we saw before the last breakout. Lets take a look.

What we can see?

• Contracted Bollinger Bands. Volatility is becoming contracted, when the BBands contract, it always leads to a new trending direction.
• My 13,26 Dual Moving Average system crossed over, signalling a buy. Every time this system crossed over, a new upwards trend began.
• We can see a classic Bullish Pennant or Wedge its debatable but both are consistently profitable.

In association with volatility contraction and the formation of a very reliable and profitable chart pattern, we can also see that HDY has fallin into a consolidation non-trending sideways trading range. What that means is simple, before periods of great share price movement there is normally a consolidating or small range of price change.

• ADX signals non-trending, consolidation.
• ATR signals non-trending, consolidation.
• Bollinger Band Width signals non-trending consolidation.
• DMI/+/- is about to cross-over.

What this means is there is going to be a breakout in share price, and soon. The million dollar question is what direction? Well there is limited reason to believe it will break-out downwards. This exact same pattern formation a month ago lead to a 35% gain. Here are some reasons why it will break upward

• Months of large institutional quite buying.
• Large insider share buying.
• Tomorrow, September options expire, strike price is 4$ and 5$, Algos say 5$ is the target, meaning that HDY should soon be pushed to 5$ per share.
• Declining Volume, which is 90% accurate when used with a pennant as bullish confirmation.
• Large community bullish sentiment
• HDY's recent promotion from the AMEX to the NYSE
• Current candlestick is at the Pivot Point. Suggesting a move.

Some of my other Oscillators such as MACD and Stochastic's also indicate a buy signal.

All in all i think HDY is poised to breakout upwards once again. I would estimate based off of volatility range and previous breakouts, we can see HDY hit $5.50 a share to possibly $6.50 a share.
Lets hope this bad boy blows upwards come Monday or Tuesday.

Position: Long HDY

Alcoa Inc: New Upward trend in development?

I recently placed a large trade on Alcoa Steel at 12.11$ a share. Seems to have been a casualty of the recent market sell off last week. The companies fundamental's have not changed, so obviously it's recent 2$-3$ fall in share price is a result of funds selling off positions out of fear, and Alcoa's shares getting tied up with the indices recent retracement.

I believe this to be a Bullish Pennant, although due to recent overall market volatility its hard to find accurate continuation patterns, so it may be a Triple Bottom with a breakout to come soon. Here are some thoughts.

• AA is at a 52-low area
• AA is current trading at its pivot point area.
• AA's lowest short term support level is $11.11
• 10 day SMA crossed over 20 day SMA, as well as ADX declining at 35, this suggests a new upwards trend is to begin, and todays recent small gap up may be the beginning of new upwards movement.

All in all i think AA is a potential bottomed out equity that is poised to at leas hit 12.75$-13$ a share with the next week or so.

Position: Long AA

Shorting The Euro: Breakout or Further Consolidation Squeeze?

In the past 8 trading days we have seen much volatility in the in market due (primarily) to the banking/debt crisis in Europe. Overall with all clear an increasing bearish outlook for the EU's financial situation, which i will not go into depth or detail that is for a macro-analysis article, i decided to investigate the ETF EUO (Pro-Shares Ultra Short the EURO). More-less i believe the EU is poised to have a de-valued Euro, due to the economic cascade, and eventual first domino to unfold in the region.

The charts typically do not lie, so i analyzed EUO's price history and found a few current and developing Buy Signals.

Above we have the set-up for a incredibly reliable (92% Bullish-Breakout) Bullish Descending Wedge.

The wedge, while visibly apparent, is technically incomplete. The rule of thumb 5 reversal points must touch the wedge channel lines in order to have a confirmed Declining wedge.

So far EUO has touched the channel line 4 times, leaving the 5th, in my opinion to occur between the 16.75 to 16.55 price range. I believe that further consolidation and sideways trading are yet to come...to form the final breakout area of EUO upwards. Looking at oscillators in a sideways trading range is necessary when determining the breakout-direction.

Lets see what we have above via Oscillator Analysis.

• Bollinger Bandwith close to approaching the 0.0 Buy signal line but also shows that sideways trading poised to breakout shortly.
• Bollinger % B also close to approaching the 0.0 Buy signal line also.
• Stochastics Show that EUO is closing in on a buy signal but not quite there. (in accordance with my analysis it has some room to pull back yet)

More Oscillators for analysis.

• CCI shows EUO to be oversold, suggesting a buy signal.
• ADX shows a new trend is soon to take place.
• Directional movement doesn't not support any bullish confidence, but DMI is also very mechanically trading based and is very lagging.
• MACD tells us we have some room to fall yet, but a reversal also seems to be in the works.

All in all its clear the Bullish Descending Wedge is in current formation, further consolidation and side-ways trading will continue for a short time frame. All oscillators suggest EUO is oversold. All Trend-Directional Movement indicators suggest a major reversal trend is due to come as well.

Taking a position now or waiting for further confirmation is trader discretionary, but regardless its pretty apparent, based of Europe's situation that EUO is a long call.

Position: Long EUO

Advanced Micro Devices Part 3: Risk-Free Arbitrage Play or Possible Bullish Momentum?

AMD (Advanced Micro Devices) fell -3.33% in late hours trading today, due to Dell Quarterly revenues more less being stagnant and growth-less. With that being said we can see the sell off was related towards the psychological reaction to dell stock selling off (since AMD chips are in Dell produced computers) i expect this sell off to be more so news reactionary than fundamentally sound.

Based off the technicals above we can  see a few things.

• First off AMD could be a example of a Descending Bullish Wedge.
• CCI and DMI-/+ may suggest its bearish trend to be coming to a end soon, indicating towards now being a potential buy point. Mind you i buy in before mechanical's say go, because i appreciate getting on a train before it leaves the station lol.
• Parabolic SAR has been descending for a while, its about time for a mechanical turnaround.

Overall a reactionary behavioral response to a quick trending equity such as AMD is almost invariably going to have a pullback day. Today was it. The next few days should prove to be bullish....i would guess hitting 7$ a share in a few weeks wouldn't be to far'fetched of an idea.

Position: LONG to 7$-$7.20

S&P 500: The Short Play.

Well folks, look at the market the past week, were down 4% for the year easy. Now if you read my very first blog "Macro-economic analysis" you would have somewhat expected this to happen after the massive commodity bubble, that came to be/exists. So what can we expect in these times of serious uncertainty.

• S&P falls 147 points in the past two weeks.
• Standard an Poor's downgrades U.S treasury bonds/yields from AAA credit rating to AA credit rating.
• Weak economic growth reports produce fear.
• Investors/ Mangers/Funds loose faith in USD and U.S economy

 It mean its truly been a blood bath this past week. On top of that while everyone is expecting  this "correction" or "bearish run" to bounce off current levels, i tend to find that to be false optimistic bias. We have a growing number of unemployment claims, a failed FED monetary policy, awful global macro-economic issues occurring in Europe and at home, and top of this outrageously high commodity prices, destroying consumer purchasing power to re-invigorate aggregate demand.

Its simple, bond yields have been sky-rocketing in Europe and they will be sky-rocketing here in the U.S as well in time. When yields rise people become pessimistic on our countries financial strength, when that occurs we will see systemic paranoia, and fear induced panic in our financial markets, so expect an average downward trend of our major index's to continue.

Overall i suggest betting against the markets overall trend buy purchasing shares of ETF: SDS
We may see some periods of bullish investors buying up equities at a "discounted price" but that is simply a illusion created by mental accounting, and representative biases. In reality come Monday we should see a drop in the markets...your entire countries credit rating getting dropped on a Friday night cant be good...seems eerily similar to Washington Mutual's Fed seizure back in 2008. The weekend before it dissolved.

Expect serious market movement downwards Monday.


Position: SDS Long

Hyper Dynamics: Confirmed Bullish Upwards Trend!

So it appears proper due diligence has paid off.....score one for Inefficient Markets Theory this pas week....as i said on my previous blog... Tuesday would be the day of the HDY price take off....12% gain that day...and its been trending upwards since..

What we are witnessing is a combination of group dynamics....shorts covering their positions...and associated longs, jumping on the train as the engine is starting at the station.

Above we can see that a new upwards bullish trend has been established and is in the process of a continuation upwards. (Blue lines indicate bullish trend lines) This does not come as much of a surprise, based of the analysis of my previous articles.

Resistance was broken at 5.16 today....i found it amusing that whether the shorts or some other market player or power broker wanted to keep a lid on that price..and failed. I witnessed many big multi-hundred thousand share sell blocks get eaten through by bullish volume. This leads me to believe that the massive 20% short postion on HDY (with 4 days left to cover) are getting desperate in finding and exit from their trade. It seems to me some major institution is trying to force HDY down to a lower price to minimize their losses.

Overall the current situation is now obviously a new bull market for HDY. Here are some other points

• $5.45 is the next resistance point...if we can pierce that by Monday- or Tuesday......it should be easy to hit $5.90-to $6.15 a share.
• This is a short squeeze in process....as the price continues to climb acceleration of PPS will increase due to the squeeze.
• Volatility will increase due to the squeeze...so expect a constant battle between intra-day long and sell positions.
• Either way this new bullish trend has a ways to go.
• Last but not least...we can expect major upwards PPS movement after the NASI announcement due any day now.

All in all the trend has been confirmed...so lets sit back and watch the direction of the trend.....but being weary of noise traders jumping aboard the train...irrational exuberance is a reality in every bull run...one must know when to properly exit the trade and take profits!!!