Hot Topic (HOTT)

Company

"Hot Topic, Inc. is a mall and web based specialty retailer operating the Hot Topic and Torrid concepts, as well as the e-space music concept, ShockHound. Hot Topic offers music/pop culture-licensed and music/pop culture-influenced apparel, accessories, music and gift items for young men and women principally between the ages of 12 and 22. Torrid offers apparel, lingerie, shoes and accessories designed for various lifestyles for plus-size females principally between the ages of 15 and 29. ShockHound (www.shockhound.com) is a one-stop, genre-spanning music website where people of all ages can purchase MP3s and music merchandise, share their music interests, and read music news and editorial content. As of January 30, 2010, the company operated 680 Hot Topic stores in all 50 states and Puerto Rico, 156 Torrid stores, and Internet stores www.hottopic.com, www.torrid.com and www.shockhound.com." (company website)

hott(1-1)
HOTT 4-month chart
hott(1-1)_1yr
HOTT 1-year chart

Buy

11 March 2010. Bought 500 at $6.50.

HOTT has been plunging for most of the last twelve months, but it seems to have bottomed out in February. Since then the 50-day moving average has turned up again and the 200-day MA has leveled out. Yesterday, HOTT reported earnings and guidance in line with Expectations; after a brief dip this morning, the stock quickly recovered.

  • Percentage price oscillator (PPO) — converging in anticipation of earnings, but still above signal line
  • Volume — heavily traded and recent above-normal-volume days have been up days

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

Sell

gain Bottom line
-5%

12 March 2010. Sold 500 at $6.21.

I was seduced by the rapid recovery after yesterday's opening and thought the market was just going to take the earnings announcement in stride. Obviously that was a premature judgment and the market is having second thoughts. I decided to bail in order to not run the risk of further losses.