Monday, November 13, 2006

The rise and fall of SMDI or "When to SELL"

Tony_r from TagBoard asked for my opinion on SMDI I wish I had a good answer...
Lets look at history of SMDI - I'm not going to bore you with my mumbling, just take a look at www.booyahboyaudit.com scroll down and read very nicely put together historical Cramer's comments and price action for SMDI.

That's history.
Since we know how it all happened by now it is easy for me to pretend that I would be able to determine time to sell and keep profits ( or at least not to sit on the dead money for long time ). But I'll do just that - will tell why I would sell at the certain point - not based on Cramer's or anyone comments, but just by "listening to the tape".
It was all fine and dandy until the week of 4/28, then from 4/28 to 7/7 SMDI started to form, lets pretend "BASE" ( market was bad so stagnant action of SMDI looked really good compared to it - no worries ).
Of course not me nor anyone else would not be able to call exact date of the beginning of the end, but still - there were IMHO reasons to worry. During above period of "base forming" volume was substantially higher on what was quite flat base, it has never decreased, was much higher on down weeks, lower on up weeks. Higher volume on a flat top tells me that A LOT of traders were getting out. And then the day of 7-3-2006 came - SMDI broke out to new high - THERE WAS NO VOLUME, next day - no follow through and it ended down. This was not the way how highly anticipated breakout of, what was still thought out of as "momentum" stock, should have occurred.
For me it was a signal: "SELL SELL SELL" - if I would be wrong - I could always buy in later on. Tax considerations would not bother me - as my accountant was saying: "Too bad that you have to pay taxes, but it is OK to make money"

What do I think of SMDI now? It is November and a lot of traders from the "top" time are at a loss, not a good incentive for any stock to go up. SIRI and XMSR left category of "momentum/crowd favorites" stocks, I might be wrong, but even in spite of growing subscribers base - SMDI potential is limited - how many chips SMDI made that yet to be used? ( Hopefully FCC regulations might add to sales -but would it be enough to push the price up?) My take would be - it will ( will it? Today's sell volume was low - leaves room for hope, hmm... let me rephrase - ease up fear of going further down ) go up in December, but it will stumble at resistance at $11 - 11.3 area.

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