Terremark Worldwide (TMRK)

Company

TMRK 1-year chart TMRK 1-year chart

"Terremark Worldwide is a leading global provider of IT infrastructure services delivered on the industry's most robust and advanced operations platform. Leveraging purpose-built datacenters in the United States, Europe and Latin America and access to massive and diverse network connectivity from more than 160 global carriers, Terremark delivers government, enterprise and Web 2.0 customers a comprehensive suite of managed solutions including managed hosting, colocation, network and security services. Terremark's acclaimed Infinistructure utility computing architecture has redefined industry standards for scalable and flexible computing infrastructure and its digitalOps service delivery platform combines end-to-end systems management workflow with a comprehensive customer portal." (company website)

TMRK 6-month chart
TMRK 6-month chart

Sell short

11-Sep-08. Today's short trades (TMRK and NOVL) are both contrarian in that MarketEdge calls them both buys. What I see in the chart that makes me go against that recommendation is that both have broken below support formed by the bottom of a narrow channel.

Terremark handily beat Expectations when it reported earnings, but that had almost no effect on the short-term channel that had formed in July. This week, however, three consecutive down-days have taken TMRK from the top of the channel to below it and the 50-day moving average, where it closed today. What I am expecting is that it will continue lower to test the 200-day moving average, which has only recently begun to rise gently. That would bring the price near the bottom of a wider upward channel.

  • Percentage price oscillator (PPO) — the PPO line crossed below the signal line this week and is diverging sharply
  • Volume — higher than normal volumes for the past two weeks, mostly on down-days.

Based on technical analysis, MarketEdge calls TMRK a "strong buy" in a "weak upward trend."

I will note that I have been bitten fairly often by MarketEdge's "strong buy" recommendations; I'm hoping that my new strategy will prevent similar missteps.

Buy to cover

gain Bottom line
-13%

19-Sep-08. As I said yesterday, "Damn, damn, damn, damn, damn!"

I covered my short in TMRK this morning, taking a substantial loss. The market this morning is full of exhuberance (rational? or irrational?) due to the likely government decision to bail out the financial sector by buying up distressed mortgages. With so much froth in the market, and with TMRK opening above yesterday's close, I put in a stop-loss order to trigger if the price rose another 3%. It did, the order triggered.

Despite having gotten caught up in the Wall Street melodrama, I can see that my original analysis was fundamentally sound. TMRK did go below the narrow channel, and it did test the 200-day moving average. For my time-frame, I was right, and MarketEdge was wrong. The flaw was that I was unprepared for the violent, rapid mood swings. Had I been able to cover at the low point, I could have reaped a 13% profit instead of a 13% loss. Ain't that a bitch?