Magma Design Automation (LAVA)

Company

"Magma Design Automation develops software for electronic design automation (EDA), enabling integrated circuit designers to meet critical time-to-market objectives, improve chip performance and handle multimillion-gate designs." (company website)

Buy

5-Aug-05. I've been watching Magma Design Automation for a few months now. In April LAVA dived, only to climb and start the reverse at the beginning of May. Since May LAVA has been climbing steadily, and the downtrend is clearly broken (see sidebar). At the end of July, LAVA reported record sales and a small loss (<$25K), compared to substantial losses a year ago.

• Price momentum (PPO) — strong at the moment, but declining
• Trend (ADX) — strong and steady
• Money flow (CMF) — strongly positive since the earnings report
• Relative strength (RSI) — neutral
• Volume — has been declining steadily over the past two months

This is not the strongest chart, and the daily range seems to be fairly wide. But, the 50-day moving average is rising, and the trading range is staying well above it.

Sell

4-Oct-05. LAVA got in trouble right after I bought it. The smart thing to do would have been to bail out, but I didn't. I took each feeble sign of life as justification for hanging on. Bad, bad judgment.