LaserCard (LCRD)

Company

"LaserCard Corporation manufactures optical memory cards, hybrid cards (such as optical/contactless chip cards), card readers and encoders, and software development tools. We also integrate turnkey application workstations and build robotic card encoding systems." (company website)

Sell short

14-Nov-06. I took an earlier position in LaserCard that I got stopped out of and decided to sit out for a while. That was no doubt a good thing, because when LCRD reported earnings, the stock did a dive from which it has been rising over the last two weeks. Although it broke back above the 50-day moving average, it failed to hold at that level and declined again for the next two days. I sold short.

• Price momentum (PPO) — picking up as a result of recent big price jumps
• Trend (ADX) — weakening, and buying pressure (+DI) is falling after breaking above selling pressure (-DI)
• Money flow (CMF) — neutral
• Relative strength (RSI) — got back up to neutral, but is pointed down
• Volume — falling off, especially if you look at the higher-than-normal days

In going short, I am going against the recommendation of MarketEdge. They show LCRD as a buy with a weak upward trend, but they also show it as overbought. Who will be right? The technicians at MarketEdge, or the gut of Trader Paul?

Buy to cover

20-Nov-06. That's settled — I was wrong. Since I was going against the recommendation of the technical gurus at MarketEdge, I sold short only half a lot and then put on a tight trailing stop. When LCRD for no apparent reason began taking off this morning, the covering order was triggered and I lost less than 1% of my stake. What have I learned? Damned if I know. Through Friday I was sure I was right. Wrong!