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Skullcandy, Inc. (SKUL) Message Board

  • onepoint272 onepoint272 Jan 4, 2013 11:19 PM Flag

    Jan 4 Landscape

    SKUL traded in a tight range going back deep into November. For all of December it traded in a very tight range with lows of $8.01. On Dec 31st a sign of weakness (SOW) came in pushing it to a low of 7.75 with high volume, 1.2M shares. That SOW in the right hand side of a TR was the shot across the bow that told that somebody knew something. Not having a position in SKUL and being busy with my life, I was not watching SKUL on Dec 31st. Had I, I may have warned the board then to get out. As it was, I didn't see it until Jan 1st, whereupon I warned the board. However, it's not like I didn't say many times to exit on an SOW in the right-hand side of a TR.

    When the market reopened after the New Year holiday SKUL was met with a downgrade, how convenient. I have no idea if there is any validity to the downgrade, I don't care, and I didn't even know about it until reading it on this board but it doesn't matter to me because everything I need to know is written in the price and volume action. So where is it now?

    I believe Picker said something to the effect that he likes it here. If my guess is right, he says that because he's eyeballing the channel lines formed by highs of July 25th 2011 and Nov 9, 2011 and the parallel passing thru the low of Oct 4th, 2011. The lower line of that channel extended to Jan 2nd, 2013 hits at 6.75. On Jan 2nd we closed above it. On Jan 3rd we closed a bit under it. And today, Jan 4th we closed back above it. By the way a linear regression channel from the IPO til now with 1.6 standard-deviation offsets almost exactly coincides with the drawn channel.

    What about the Fibs? A = 16.75, B = 11.84, C = 14.58. The 100% extension was 9.67 and the 127.2% extension was 8.33. Using a 161.8% extension puts D = $6.64. SKUL hit it and closed above it. If it goes lower, than the next likely Fib target is a 200% extension at $4.76. But a 1.618% extension is seriously extended and a nice bounce is not guaranteed but it is very highly probable.

    What about the pivots. The December monthly S1 pivot was $6.75. SKUL hit it and closed above it. The January monthly pivot point is $8.12. There is a 70 to 80% chance of hitting $8.12 in the month of January. The yearly pivot for 2013 is $11.08, likewise with a 70 to 80% chance of being hit in 2013. Next week's pivot is $7.18. That should get hit. Next week's S1 level is 6.23. Next week's R1 level is 7.80 which coincides nicely with the SOW bar high of 7.79 but it'd take a bit of a short squeeze to make it up there considering the volume it came down on; 3.3M.

    What I'd like to see is a low-volume retest of the Jan 2nd low, $6.55 which would confirm the selling is done. Intra-day it double topped at 7.05 / 7.04, so a test of 6.55 may be possible on Monday.

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    • Fantastic discussion/debate, gold stars for you both! A breath of fresh air to see this board used to seriously, rationally and respectfully discuss the pros and cons for SKUL going forward. Fantastic

    • coreylynnh@sbcglobal.net coreylynnh Jan 6, 2013 2:25 AM Flag

      Although I have been incredibly critical of you onepoint I at least do respect and appreciate your explanations and efforts. If this works for you and others then great. As you stated before I am ignorant of its value, I don't see use in this information. To me this is still like Nostradomus saying there will be war, famine, fire, and floods. When a war breaks out his believers will point to his writings. If a flood occurs his believers will point to his writings. Same with famines and fires. These always occur of course, globally and frequently, and not once has Nostradomus's writings been used BEFORE an event occurred. In comparison your predictions say SKUL could trade as low as $1.73 or as high as $11.08. Since this is mathematics and statistics, I am assuming there is also a confidence interval placed on hitting any value, i.e. your 70-80% chance of hitting 11.08. If SKUL goes anywhere in between these values I suppose your supporters will say how freakishly accurate you are. I would just say you gave yourself a large enough range to be fairly confident the stock will be somewhere in that range most or all of the time. Perhaps I am wrong and my ignorance prevents me from profiting even more. If anything, you predict a 70-80% chance it will hit above 11. Well that's great if it does then I make a very good profit on my position, 6.7% and possibly more if I can sell more calls to cover this position. In this case I hope you are right.

      To me, what really matters are their earnings results and anything perceived by a decent number of investors as significant news. Investors tend to overreact to downgrades and on Wednesday they did for SKUL. A high short interest and the manipulation have the stock price depressed at this point when compared to competitors in its industry. There is reasoning behind it, SKUL may not be able to sustain such incredible growth. It is the risk I accepted when I opened a position on this stock. However, if SKUL continues to grow at a double digit or higher growth rate then the stock's chances of going up increase and eventually it will appreciate the longer they can sustain it. If the company starts seeing significant dropoff in growth or begins to decline in sales/earnings then the stock will likely go down. If the stock ever gets to the point where it is fairly valued compared to its competitors then the stock should currently be somewhere between 10-20. I will wait patiently for this appreciation while remaining watchful for fundamental changes in its growth potential.

      • 1 Reply to coreylynnh
      • Thank you for your comments. Let me say firstly that at this juncture I am not attempting to "predict" direction, rather to point out that although the longest trend is down and the trend on a weekly basis has been down since $16.75, the price has reached a level of potential support and that a trend change is possible. However, trend is primary, and therefore I am not long and won't be until there is a signal of trend change which will yield a 10 to 15% move. For all I know this could do a Radio Shack and slowly grind its way to $2 over the next year.

        With simple technical recognition one could have known with certainty that the weekly trend changed on August 29th and exited at the closing price of $15.70. And if that important date was missed the next easily recognizable exit was on October 5th with a close of $14.15, the last point of supply (LPSY).

        I don't mean to say that the selling is now over but my "assumption", my "hypothesis" is that Jan 2nd was a selling climax; it's technically oversold at potential support. If Jan 2nd was a selling climax and we see selling dry up, then we should next see an automatic rally, a short covering rally, in the near future. From there a trading range should develop roughly between the low of the selling climax and the top of the automatic rally, $6 and $8. For me, that is a trade-able range. But I won't put on a "position" trade until the trading range has developed for some time (weeks to months) and a sign of strength (SOS) appears, then I would buy a low-volume retracement. If on the other hand an SOW appears well then we'll see another Jan 2nd-like selling day.

        Fundamentals are not not "directly" connected to stock price, for any issue. Have the fundamentals for SKUL changed that much since $16.75? Not really, not enough to justify a 59% drop in the stock price. Oh sure a couple analysts downgraded it, but way late. Why are they late? Because they work for interests that are in the business of harvesting money from the public. Their timing is everything and rigged against the public.

        To quote one of my favorite movie characters, James Stewart as George Baily in It's a Wonderful Life, "Don't you see, Potter's not selling, he's buying!"

        You see, my paradigm is that the smart money, uses the fundamental news to help them move the stock in their direction. Therefore, the prudent approach is to follow the smart money, not the fundamentals. The capital in the hands of the public (the dumb money) is fragmented and has no power to move price UNTIL the smart money lets them or pushes them to do so. The smart money operates principally in trading ranges whereas the dumb money operates within trends.

        In short then, I am not long because, aside from day trading, long is wrong and there is currently no compelling reason to get long or stay long unless you are aggressive and very risk averse. However, the potential for a trend change is possible here.

    • Correction, just in case anybody is checking or gives a dam_, the long term downtrend channel is defined by the highs of July 25th 2011 and APRIL 16, 2012. The lower parallel line passes thru the low of Oct 4, 2011. This channel is a most excellent fit.

      Previously I had said that a linear regression channel with standard deviation offsets of 1.6 coincide with the drawn channel. Incredibly the more precise number is 1.618. 1.618 is an inverse fib ratio, the inverse of the golden ratio 0.618. And as I've said the Fib extension thus far off the 16.75 high is 161.8% or 1.618; CD = 1.618*(AB). Harmonic mathematics in action. Anyway, with an offset of 1.618 standard deviations, the regression channel hits the highs and lows to within pennies.

      In case you don't know, the golden ratio originated from an ancient question asking if you had a line with length A to C, where would you divide the line with point B such that the ratio of AB/AC is the same as the ratio BC/AB? The answer is you'd put B at 61.8% of AC. Then the length of AB=0.618 and BC = 1.000 - 0.618 = 0.382. So, the ratio AB/AC =0.618 as does the ratio BC/AB since 0.382/0.618 = 0.618........Golden. These harmonic ratios and their derivatives are the mathematics behind fractal geometry found in nature and in the price movement of markets.

      The inverse of 0.618, or 1 / 0.618 = 1.618, an important extension ratio. The inverse of 0.382 is 2.618. If SKUL goes lower, and the 200% extension, $4.76, does not hold, then the next stop would be the 261.8% extension or $1.73. These fib extensions are based on the weekly-chart swing points of A=16.75, B= 11.84, and C=14.58.

      If we look at the swing points on the monthly chart then A=23.40, B=11.81, and C=17.76. For a 100% extension, or AB=CD, then D=$6.17. Either we go there soon or, as I've said in a previous post, since January will have high volume a retest of the January low in February is likely. If we bounce in January then I would expect the February retest to hit $6.17.

    • If SKUL can get a decent bounce started, there will be bullish divergences in the lagging indicators. For example the Full Stoch (14,3,3) on the daily is not putting in a lower low and neither is my price oscillator. Likewise on the weekly. The Stoch has been bottomed out for 2 months but it is discernibly higher despite the lower low of price....bullish divergence. The better divergence visibility is on the momentum indicators though. The weekly MACD is as low as it has ever been but the histogram is showing bullish divergence.....just need a bounce to get started and the dumb-money shorts will eyeball these and bail.

    • Because of the timing of the recent sell-off, Jan 2nd, the monthly volume for January will be high. Therefore expect that January's low will get retested. February should be a good month for a low-volume retest. The point is intended for the non-traders, you may want to take special consideration of the possibility of trading out of SKUL on a January bounce and buying back in February.

      If you take a line drawn from the low of Oct 2011 to the high of Aug 2012 and move it to the current low you would find that it intercepts the top channel line (mentioned previously) at the yearly pivot price of $11 about the 1st week of November. Granted this would be the ideal of symmetry, but thought it might be worth noting.

 
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