SimpleTech (STEC)

Company

"SimpleTech, Inc. is a global engineering and manufacturing company that offers memory and storage products for a wide range of industrial and consumer applications, including IP networking, consumer electronics, personal computing, and telecommunications." (company website)

STEC 3-month stock chart

Sell short

Since making a new 52-week high at the beginning of 2007, STEC has been moving down, with two successive lower highs. The one-month moving average has turned down, and STEC is trading below the 50-day moving average. Yesterday STEC broke well below the $10.50 level and pierced the lower Bollinger band. It is now about back to where it was before the company raised its guidance; apparently The Street is having doubts.

  • Price momentum (PPO) — falling sharply
  • Trend (ADX) — strengthening again after a long fall, but with selling pressure (-DI) well above buying pressure (+DI)
  • Money flow (CMF) — brisk outflow
  • Relative strength (RSI) — weakening steadily
  • Volume — huge volume on yesterday's sell-off

Based on technical analysis, MarketEdge calls STEC a "possible trend reversal" in "strongly deteriorating condition."

I've seen falling stocks go through a big sell-off just before starting to rise again, a sort of cathartic purge. If I had been thinking more clearly, I might have waited a day before selling short to see if that were the case with STEC.

Sell

gain Bottom line
5%

At the open, STEC jumped up and then plunged as The Market digested news that Simple Tech had sold its consumer division, along with the name SimpleTech. As the price crept back up I decided to cover rather than wait to see what would happen after the first half-hour of trading, which is often the most volatile of the day.

bird in the hand

Having come out holding the short end of the stick on several short trades lately, I succumbed willingly to bird-in-the-hand thinking.