Click chart to enlargeAll of the relative strength (resistance to decline) that RBCN has been displaying over the past several months has proven to be an overwhelming force, exposing itself in an incredible breakout to new highs today. To say the least, these highs are coming long before the market posts its own new highs. The theory we have that relative strength is the most important indicator of a stock's intermediate term success has been shown to have real predictive value with RBCN's breakout.
We bought more RBCN this morning at just under 29, putting our portfolio at a point where we're just about 50% invested. There's no guarantee that the broader market has seen its lows yet, hence the other 50% we hold in cash.
For those of you thinking you've "missed" RBCN... think again! Today's action is a very strong signal of the health of the stock (and the company), and bodes very well for its near term (3-4 month) performance. If we did not already own RBCN, we would buy 25% of our intended position here on the breakout and wait for a pullback (approx 50% of the breakout's magnitude) to buy another 50%. The last 25% would be bought if the broader market corrects to new lows, pulling RBCN back below resistance.
We may still buy more on the pullback ourselves. Conversely, there is a point at which we'd sell some of our shares if the stock continues to rally strongly over the next 2 to 3 sessions. This is unlikely, but it does happen.
In almost every case we've seen where a stock breaks out to new highs strongly while the market is just beginning a turnaround from a correction, it has been just the beginning of a very impressive bull run for the stock. It should be noted, though, that the breakout is almost always met by a retracement which can be substantial, as momo traders buy and sell the breakout without any intention of holding for several months, or quarters, the way intermediate term investors do. This retracement of the breakout is often reversed very quickly, as would-be buyers see it as a second chance to get on a train they thought they had missed.
As long as the broader market doesn't sell off significantly, it's our guess that RBCN will rise steadily for the forseeable future.
16 comments:
I told you in this blog.
I bought RBCN at the end of January.
You must be up nearly 100%... nice work! Looks like you may even extend those gains quite a bit.
In fact I sold 1/4 of my pos at 22, 1/4 at 24 and 1/4 at 28.
I'm very close to sell the last portion.
You know what? I just sold everything. :) I'm not a long-term investor or any kind of investor.
But keep up the good work, I like your blog!
Wow, thought you'd stay in given your low entry point. But of course you can't complain, you've made your money on RBCN already. Are you just going to wait on the sidelines for awhile, or are you starting any new positions with the capital?
In the case of RBCN I will wait on the sideline. I never buy a breakout, just the opposite, I usually sell it. I want to buy the pullback or buy before the breakout on the uptrending trendline or on an SMA (in this case 4-7-8 of June on the 50SMA) but I didn't buy there more. I don't like today's heavy volume, it could mean greed/panic buying.
But that's just my opinion.
It sounds like you have a shorter time frame than us. Your timing concepts are all sound.... just geared toward shorter term trading than what we're after. We're trying to buy somewhere in the 20's or 30's (price is not so important), in hopes of selling somewhere in the 50's or 60's. We're far more concerned about seeing continued relative strength than getting a better price. Buy high, sell higher... that's our typical approach. We like that your approach minimizes risk as much as possible, though.
Sold Friday 27.22 on stop loss gone bad. A gain is a gain but wow this sucks....
I had full intentions on getting back in but I thought it would be touching it's lower trend-line before the break out. Anyway, I want back in but cannot get myself to buy higher than what I sold for. I hate human emotion
Anon, it's tough to buy back in higher, but your thinking is too short term. If you're planning on selling at 50, for example, then who cares if you bought at 20 or 30? Either way, you're far exceeding the goal of consistently making about 20 to 25% annually.
You'd be suprised how fast your account gets into the millions if you can keep that up. Buying at 30 versus 27 should be irrelevant. All you should be focused on is buying a strong stock. The buy-in price only matters if you plan on selling it next week.
Thanks Snot, my mentality comes from starting my investing during the worst time ever. I have good ideas and timing turn to losing my life because I held onto the stocks during the crash. I'm trying to restart my life and that's why if I see a 10% gain I'm diving towards the stop loss button. Because of this scarring, I sold VECO at 33.33 at a major loss (did have a gain at one point) and now my RBCN at 27. I'd love to buy and hold but the scars are still there. What's terrible is I'm self aware of what you're saying, but the memories will always linger. Thanks for your blog and insight
"in hopes of selling somewhere in the 50's or 60's"
That's in my opinion is investing. :) I don't hold a stock more than a couple of months (usually max 1 or 2), in fact RBCN was my longest trade ever (more than 4 months). :)
could this simply be a short squeeze?
Shares Short (as of May 28, 2010)3: 5.39M
Short Ratio (as of May 28, 2010)3: 13.20
Short % of Float (as of May 28, 2010)3: 46.10%
Shares Short (prior month)3: 5.22M
888888's
Could be a short squeeze, or options expiration week, or it just may be one helluva strong stock!
Rubicon Technology, Inc. Prices Offering of 2,634,000 Shares of Common StockLast update: 6/16/2010 8:36:00 AMFRANKLIN PARK, Ill., Jun 16, 2010 (BUSINESS WIRE) -- Rubicon Technology, Inc. (RBCN) (the "Company") today announced that it has priced an underwritten public offering of 2,634,000 shares of its common stock at $30.00 per share.
What does that mean? The company itself believes $30 is the value of their stock?
No, it just means that RBCN needed $79,020,200 to "expand their crystal growth manufacturing facilities and for working capital and other general corporate purposes."
In corporate America, whenever you see vague terms such as "working capital" or "general corporate purposes", what they mean is "hookers". RBCN gave no indication of just how much of the $79M will be spent on hookers.
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