Harmonic (HLIT)

Company

"Harmonic Inc. is a leading provider of versatile and high performance video solutions that enable service providers to efficiently deliver the next generation of broadcast and on-demand services including high definition, video-on-demand, network personal video recording and time-shifted TV. Cable, satellite, broadcast and telecom service providers can increase revenues and lower operational expenditures by using Harmonic's digital video, broadband optical access and software solutions to offer consumers the compelling and personalized viewing experience that is driving the business models of the future. Harmonic is headquartered in Sunnyvale, California with R&D, sales and system integration centers worldwide. The Company’s customers, including many of the world’s largest communications providers, deliver services in virtually every country." (company website)

HLIT 1-year stock chart

Buy

Harmonic has been moving up sharply for some time (see sidebar), although it did pull back considerably at the end of 2006. After reporting earnings, HLIT moved up steadily to a new 52-week high, followed by a mild pullback that seems to be over. HLIT closed the session up 20¢ from my buy-price.

  • Price momentum (PPO) — increasing sharply until latest pullback
  • Trend (ADX) — weakened quite a bit during pullback, and now buying pressure (+DI) and selling pressure (-DI) are roughly balanced
  • Money flow (CMF) — brisk flow of money into HLIT
  • Relative strength (RSI) — had been very strong, now neutral
  • Volume — increasing again after beginning of 2007
HLIT 2-month chart HLIT 2-month chart

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

Sell

gain Bottom line
17%

Having enjoyed a nice run-up to a new 52-week high at $11, HLIT has been wandering around just below the $10.50 level for several days, gradually inching lower. I decided to lock in profits today. There are inklings of mild deterioration in the chart: momentum (PPO) is slowing; buying pressure (+DI) is dropping off; inflow of money (CMF) is weakening; and relative strength (RSI) is dropping slightly. What I think this points to is a deeper pullback. There really hasn't been a significant retracement since the beginning of 2007, and HLIT is quite a ways ahead of the 50-day moving average. The chart still looks quite healthy, so if I'm right I can get back in at a lower price and enjoy another ride up.