Tale of the triangle, chapter 2


Our story so far.
Zoran Corp acquired Oak Technologies, in which I held a position, in a stock plus cash deal, leaving me with a few hundred shares of ZRAN. In August, the ZRAN stock chart formed a lovely symmetrical triangle and almost reached the tip of the triangle before breaking. Unhappily for me, it broke down instead of out (up). A competitor had announced that it was gaining market share from Zoran. Then, Zoran announced that it would not meet expectations for third quarter revenue and earnings. ZRAN stock dropped like a rock. Having already received cash for my shares of OAKT, I held on to the ZRAN inasmuch as I only had to break even on them to turn a tidy profit on the overall transaction.

Earnings surprise. Yesterday (23-Oct-03), after the market closed, ZRAN announced its earnings for the quarter.

• ZRAN reported a loss of $1.53 per share for the quarter, in line with lowered guidance
• The year before ZRAN reported a profit of .17 for the same quarter.

• The Expectation was that ZRAN would have revenue of $78 million for Q4 (16¢/share)
• Zoran gave guidance for Q4 revenue of $70 million to $72.5 million (7-10¢/share)

Bam! Kerpow! ZRAN closed at $18.17, but in after-hours trading, the price plummeted 17% to $15.10. Today ZRAN has continued to trade around $15, ± 50¢. So far today (20 minutes before the close), 11.6 million shares have traded hands; normal daily volume is 1.7 million shares.

ZRAN stock chart

If only. Holding didn't seem like a terribly bad idea. The -DI line was falling, if slightly, indicating lessening selling pressure. The Chaikin oscillator was rising, indicating future rises in price.

But! At the beginning of its triangle formation, ZRAN was trading for $27 per share. If only I had sold then, I would have reaped a tidy $7 per share profit. As it stands now, I'm down $5 per share.

As they say: • Past performance is no guarantee of future results. • If you play with fire you might get burned. • A fool and his money are soon parted. • You got to know when to hold 'em, you got to know when to fold em. Etc. Etc. Etc.

I think I'm going to be sick.