PMC-Sierra (PMCS)

Company

"PMC-Sierra(TM) is a leading provider of broadband communications and storage semiconductors for metro, access, fiber to the home, wireless infrastructure, storage, laser printers and customer premises equipment. PMC-Sierra offers worldwide technical and sales support, including a network of offices throughout North America, Europe, Israel and Asia. The company is publicly traded on the NASDAQ Stock Market under the PMCS symbol and is included in the S&P 500 Index." (company website)

PMCS 3-month stock chart

Sell short

PMC-Sierra hit bottom in mid-2006 and started to trend upward. However, the uptrend has been broken, and PMCS looks to be headed down again. The 50-day moving average is falling again. At the moment, it is overbought and testing the 50MA, which should make this a good place to get in.

  • Price momentum (PPO) — picking up since the most recent low
  • Trend (ADX) — weakening, although buying pressure (+DI) is above selling pressure (-DI), doubtless because it is overbought
  • Money flow (CMF) — slight inflow
  • Relative strength (RSI) — strengthened to just above neutral
  • Volume — declining gradually

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

Buy to cover

loss Bottom line
-3%

I covered my short position in PMCS this morning. It tested the 50-day moving average and broke right through it. The PMCS chart continued to improve, and, because I had sold short so many shares, I decided to cover rather than hang around to see if it would come back down.

I'm fast coming to the conclusion that by the time MarketEdge is willing to call something a short candidate, it's really too late. It seems much safer to bet on stocks they describe as having "strong deterioration" in the chart, such as RIGL which I still hold short and that looks to continue on down.