Focusing on ARMH

Last week I did a piece on the Semiconductor stocks, mainly the top holders in the ETF- “SMH”. I highlighted the top performers in the SMH with their weighed holding from the top down. See Semiconductor: http://wp.me/p2oNy1-2m.

 ARMH stuck out like a sore thumb. Rightly so due to strong earnings, a .48% dividend yield, and as a top tablet play has finally taken this UK based stock to new highs.

So let’s look at what be in store for ARMH as it has climbed towards 40 dollars. On 10/23, ARMH gapped up to $30 and in 23 sessions moved with little resistance to top the tape at 37.41 on 11/28 and today, almost 7.5 points higher. The breakout on the gap plus the test and break of the May 2011 highs at 32.18 was broken in one week with huge range expansion up. Obviously a powerful move with portfolio buying daily. So what’s in store for ARMH?  My thoughts are this. The move is extreme and technically the charts are super strong. But I see some divergence in the RSI that started at the beginning of November. One month later, we have higher prices with lower RSI reading creating a diverging RSI indicator. So this is a great spot to digest the move and if you’re long, possibly take some profits or protect from an aggressive pull back to test 35. Short sellers, in a strong trend like, this can get smashed. But as the RSI shows divergence, the short sale is in play and needs to be put on with small size due to the contra–trend technique. Look for a few aggressive selling days to buy back their short and book some profits as it can get aggressively sold towards 35. 35.17 on the chart marks the 20 ma.

Chart by Lightspeed

Chart by Lightspeed

Some key things to look at on this chart:

  • The strong gap with continuation of the trend with little rest or pullback.
  • The RSI absorbs the rest phases (which is normal) but fails to produce higher or even matched high RSI reading as price makes new highs daily. See white clouds on price and rsi.
  • The past three sessions are choppy with larger than normal ranges and declining RSI levels. This can mean a temporary top.
  • The ETF-SMH holds approximately 6% of ARMH.

Nick Pirraglia

Disclaimer: The material provided is purely for educational purposes only. No information contained herein is a solicitation or offer to buy or sell any securities. The information provided is in no way investment advice from Nick Pirraglia, TradersThinkTank or any other contributed content. The opinions, analysis and commentary on this website are purely the subjective views of the author. Nick Pirraglia is not a Registered Investment Advisor and under no circumstances should any content from this site be used as investment advice, recommendations, or trading advice. Please consult your financial advisor prior to making investment decisions.

About Nickolas Pirraglia

Nick Pirraglia started his career in trading in 1991 after returning to the US as an Army Officer deployed in Iraq. He began as a bond broker and worked his way into trading. Expert mentoring, hard work and a disciplined approach to the markets has allowed Nick the ability to maintain a very successful career in Capital Markets and Trading for over 20 years as a professional OTC Market Maker and independent trader. Nick has also managed the trading desks for a two Dallas based capital management companies and traded equities for a Dallas based hedge fund. Nick has trained and mentored thousands of customers in the rigors of trading, technical analysis and risk controls. Recently, Nick had broadened his market experience through the design and product management of two automated trading platforms. He has the pleasure of working with some of the brightest minds in the trading community and has collaborated with experts in data, design, engineering and trading psychology. An avid long distance runner, Nick completed several marathon events, qualified for the Boston marathon, completed several long distance Triathlons to include finishing a full Ironman triathlon.
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3 Responses to Focusing on ARMH

  1. Nick: I am always reluctant to live on the darkside, but when I do.. I always pick on the weak, the abused, the wretchedly beaten and downtrodden … not stalwarts like ARMH;) Your “contra–trend technique” may make some sense though for the nimble, as the SPX is ready to retest the 200ma around 1385. ARMH can move hard to the downside with the market as AAPL falters, before it recovers… but jack be nimble, jack be quick.

  2. Ahhh Pat..always great to have you put the “dark side” in prospective. Nimble is the key and I agree longer term that ARMH is by far a stellar name on the long side, plus a potential take over target for 2013? But some warning signs are there.

  3. Here is a trade Eva put on early n the week: short AAPL long NOK, bam. She doesn’t put on a lot of trades from what I can tell, but smart when she does.

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