Tuesday, November 29, 2011

Looking for Shorts in all the Wrong Places?

Sometimes the best time to find a good short opportunity is during a strong up market. If a stock is badly lagging a strong market then the alarm bells in your head should be going off.

Take Cheniere Energy (LNG) for example. The Dow and S&P500 were each up around 3% today. Yet LNG, which initially gapped up in the morning, spent the rest of the day gradually drifting lower. Price initially found support at $10, which was previous support between the 8th and the 11th this month. However eventually this $10 support broke and the stock ended up closing the day down over 3% at 9.89 (-0.32).

I went short LNG today @ 10.14 with a 8.00-8.50 target. The false breakout above 12.50 last week gave me added confidence that the stock was tired and may be poised for further losses. My stop is currently above 10.60 (which gives me about a 3:1 risk/reward). I'll likely lower my stop again after the open tomorrow after I see how the stock opens.

A short position like this works well, particularly when you are otherwise long equities as I am. If the market continue higher then maybe LNG will get dragged higher with them and I'll get stopped. But the loss on this trade will be small relative to the gains in my other long positions. However, if the market turns and starts to head lower, a stock like LNG will almost certainly drop further than the rest of the market providing a decent hedge against potential losses on my long positions.

Futures are already pointing to strong gains ahead of the European open, so we could see LNG pop back above 10 on the Tuesday open, but I would fade that move if we see it keeping my stop above 10.60.

Monday, November 28, 2011

LG Panel Poised For A Breakout

This is one of my favorite plays right now.

Note: LG Panel (LPL) makes the display panels for LCD TVs (and other devices), it is not LG Electronics the electronics manufacturer.

Fundamentally passive display 3DTV panels are gaining huge acceptance over the active types that were originally introduced 1-2 years ago. LG Panel supplies the passive panels to LG and Vizio. According to a recent study, 8 out of 10 consumers prefer passive over active and sales of passive 3DTVs are growing faster than active.

Recent Black Friday #'s suggest continued strong sales of 3DTVs. Recent estimates have been raised and now call for over 22 million 3DTVs to be sold this year with that number rising to 100 million in 2014. Recent 3D hits like Hugo (by Martin Scorsese) are also driving renewed interest in the sector as a whole.

Technically LG Panel's chart looks really strong, consolidating between 9.60 and 11.2, above its 50 day moving average. Look for a break above 11.10 to add to long positions for a test of the 200 day moving average currently @ 13.20.


Thursday, November 24, 2011

SENSIO Technologies Quarterly Loss Narrows

SENSIO's Q1 revenues (for the period Jun11-Aug11) were up over 150% vs the previous quarter. The absolute level of revenue is still small, but many of their business lines are just now starting to generate revenues. Upcoming quarters should see nice growth in all business segments, except maybe for Live3D which will probably won't generate much in the way of revenues in Q2. But starting Q3 we should see Live3D revenues pick up again from the UFC 3D events and then (hopefully) the Olympics later in the year. Possibly other big events as well which have yet to be announced.

The CE (Consumer Electronics) segment should see significant growth over the next couple of quarters as Vizio passive 3DTV sales ramp up. I also hope to hear of new licensing deals in the CE segment in the near future (we should get an update on the CC tomorrow morning).

The VOD business line should be launched over the next few weeks which will add yet another revenue generating segment to the company's arsenal (should get an update on this as well during the CC).

Expenses look to have stabilized. They were up vs. a year ago (due mainly to the Algolith acquisition) but down vs. the prior quarter.

SENSIO generated a net loss of .0185 per share for the quarter vs. a loss of .0306 cents in prior quarter.

I think it's a fairly positive report. The company is in transition from being a one-trick pony (Live3D) in 2010/2011 to one with 4 distinct revenue generating units (once VOD is launched). SENSIO should continue to narrow losses over the next 2 quarters if expenses remain stable, and possibly be in a position to turn a profit 3-4 quarters from now. Significant profits if things go really well (eg. new major licensing deals).

We'll see what the market has to say after the CC tomorrow - but in my opinion the share price remains fundamentally cheap (even after a 46% rise in the stock over the last week) given the huge potential for growth over the coming months and years.

Link to SENSIO's Q1 Earnings Report: http://sensio.tv/pdf/Q1_Results_2011_2012_ANG_Version_finale.pdf

Thursday, November 17, 2011

EUR/USD Hourly Chart

Hourly RSI has worked off oversold conditions. Currently 1.3469. Test of 1.3425 support seems likely. The descending triangle formation and RSI suggest a break lower.

Monday, November 14, 2011

EUR/USD - Ignore the Noise

Ignore the noise and look at the big picture. Even while it may "feel" like the Euro refuses to go down, the weekly chart clearly shows a break of the uptrend that was in place since spring 2010. The subsequent retest of the trendline failed and price has resumed its downward trajectory. Based on this chart we should see 1.2800 by early/mid December.