Harmonic (HLIT)

Company

"Harmonic Inc. is a leading provider of digital video, broadband optical networking and IP delivery systems to cable, satellite, telecom and broadcast network operators. Harmonic's open standards-based solutions for the headend through the last mile enable customers to develop new revenue sources and a competitive advantage by offering powerful interactive video, voice and data services such as video-on-demand, high definition digital television, telephony and Internet access." (company website)

Buy

12-Apr-06. After jumping back into HLIT last week, HLIT took a drubbing in two days of funk on the Nasdaq. I still think that decision was right, so I am adding to the position at a lower price today. The encouraging signs are a drop in selling pressure (-DI) and an uptick in relative strength (RSI) and indications that HLIT is leaving oversold (StochasticRSI).

• Price momentum (PPO) — last two days took a serious toll
• Trend (ADX) — weakened last two days, but selling pressure (-DI) is falling
• Money flow (CMF) — still negative, but stable
• Relative strength (RSI) — ticking up
• Volume — a million shares change hands most days, fairly stable

Sell

3-May-06. On April 27, Harmonic reported a loss of $0.07 per share compared to earnings of $0.02 per share for the year-ago period. Ouch! When the market opened the next day it was a bloodbath, with 6 million shares changing hands (more than 3x average). In the following session there was a lot of up and down, ending just slightly above the open. Hmmm, methinks, an over-reaction bounce might soften the loss. It was not to be. Today simply drove more nails in the coffin. Having failed to hold at the 200-day moving average for the third day in a row, HLIT went south with a vengeance. Sell!