PMC-Sierra (PMCS)

Company

PMCS 1-year chart PMCS 1-year chart

"PMC-Sierra(R) is a leading provider of broadband communications and storage semiconductors for metro, access, fiber to the home, wireless infrastructure, storage, laser printers, and fiber access gateway equipment. PMC-Sierra offers worldwide technical and sales support, including a network of offices throughout North America, Europe, Israel and Asia." (company website)

PMCS 6-month chart
PMCS 6-month chart

Sell short

28-Jul-08. Although PMCS beat Expectations by a penny when they reported 17 July, the stock has continued to fall.

  • Price momentum (PPO) — losing momentum
  • Relative strength (RSI) — just below neutral
  • Trend (ADX) — weakening, and selling pressure (-DI) has crossed above buying pressure (+DI)
  • Volume — recently, the higher-than-normal-volume days have all been down days

Based on technical analysis, MarketEdge calls PMCS a "short candidate" in a "weak downward trend."

Buy to cover

gain Bottom line
-15%

11-Aug-08. I decided to cover my short position in PMCS this morning; it is up again today for the sixth consecutive day. Although MarketEdge still says to "avoid" PMCS they have dropped the "short candidate" recommendation and note that it is "moving against opinion." Well, yeah!

PMCS is seriously overbought. Normally one might think that it would soon pull back, but in the context of the frothy rally going on following the drop in oil prices and the Fed's decision to hold interest rates unchanged for the second time, I'm not willing to count on "normally." PMCS did, after all, beat expectations with the last earnings report, and it may just be the case that this is the start of a reversal. Plus, it is now above both moving averages and the 50-day average shows signs of rising. The volume isn't there to support the idea of a reversal, but I've taken some big losses recently making the wrong bet, and it's time to hunker down.