Rackable Systems (RACK)

Company

RACK 1-year chart RACK 1-year chart

"Rackable Systems, Inc. is a leading provider of server and storage products for large, scale-out data center deployments. Innovative designs, patented technology and commitment to customer service have enabled us to successfully address the needs of many of the world's most complex data centers." (company website)

RACK 6-month chart
RACK 6-month chart

Buy

After a peak last November, Rackable Systems has dropped more than half its share price. Since the low in April, RACK has stabilized and moved sideways. Although RACK reported a large loss yesterday, including large charges, The Street seems to have paid more attention to the improving gross margins and cash flow and the reassurance of the company's new CEO for better future results.

  • Price momentum (PPO) — slightly below neutral and flat
  • Relative strength (RSI) — essentially flat at neutral for the past quarter, but rising
  • Trend (ADX) — weak, but buying pressure (+DI) is getting a big boost after earnings
  • Volume — seems pretty stable at around 1.5M shares/day

Based on technical analysis, MarketEdge calls RACK a "buy" in a "weak upward trend," noting that RACK is "oversold" and at a "good entry point."

Sell

gain Bottom line
7%

The Market just went wild today, and when RACK leaped from looking like a loser to showing a solid gain, I put on a trailing stop (2%) to lock in profits. With so many stocks making such big moves today, it seems very unlikely they are all going to stay up there, especially in the short term.