Tivo (TIVO) has recently blown the doors off of its price action, rising almost 70 percent last week after the federal appeals court upheld a contempt ruling against EchoStar (SATS) and Dish Network (DISH) for continual patent infringement. All of this isn’t exactly stunning news of course but it does lend itself to some interesting possibilities from Tivo in the future.
First let me say that I became a Tivo user because I was sick of paying $200.00 a month to Time Warner Cable (TWC) for the privilege of Pay Per View and receiving 500 channels that were never utilized. I canceled everything but Road Runner, bought the Tivo box and signed up for Netflix (NFLX) so I can stream movies to it, and finally installed an HD antennae ($50.00) to get the local networks. Presto, $ 200.00 per month became $ 75.00 per month. OK, so I will miss Bloomberg and CNBC but not enough to shell out an additional $125.00. I’m not Jonesing for Cramer that badly, especially when I can get those channels for free on the internet. I can also can live without college wrestling, The Knitting Channel, or “Stuff TV”, whatever the hell that is. You gotta love the technological revolution that is available to cheapskates.
I digress..
A bull flag has formed in the TIVO chart and it doesn’t get to look much better than this. (Click chart for larger view)
For those unfamiliar, the first part of a flag pattern is called the flagpole (mast), during which the stock price spikes because of a positive development within a company. As the stock goes up, people that purchased the stock at lower levels begin selling which is where the “flag” portion of the bull flag begins to form. Because sentiment is positive in the beginning, most of the sold stock is easily absorbed. Soon after, the price begins to stumble on reduced volume and after several days of weakness ( be careful if it lasts more than 20 days) a small rally begins and a low point in the flag is formed. The target price for a bull flag pattern is calculated by adding the height of the flag pole to the breakout level should it occur. Personally I use a method of adding the size of the flag pole to the low point of the flag instead of the break out point. This gives you a little more cushion to get out earlier before the final re-tracement.
How this applies to the Tivo Chart.
If the price action were to break upward through the flag formation (and close) it should move the same amount of points as the flag pole itself (approximately $6.00) from the lowest point of the flag ( currently around $15.50). This would place the pattern’s completion point around the $21.00 mark which could take anywhere from one to six weeks.
Important:
( TRANSLATION: Gino is covering his ass to avoid blame)
- It is unwise to take a trade until evidence of a break-out is clear.
- If the stock closes below the original break-out level, the pattern becomes invalid.
- The target price is not always the resulting price so protect yourself. Do not be surprised if analyst “buy” recommendations come out when price action gets close to pattern completion. If this happens, do yourself a favor and get out immediately.
- Most Important Rule Of Trading: When in doubt. Stay out.
If anyone has questions please feel free to ask and I will respond as quickly as possible.
Gino, Been in and out of TIVO for years. Sold recently at 16.95 on the court decision news. Been my experience that with each win TIVO spikes significantly but soon retraces most of the gain. My question is does EchoStar have any further appeal rights or have they now been exhausted?
Boomer, what will probably happen is a final appeal the the supreme court, but they are under no obligation to hear the case, which is probably why the price spiked as it did. I think the general consensus is that it will be a done deal.