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Skullcandy, Inc. Message Board

  • onepoint272 onepoint272 Feb 25, 2012 1:03 PM Flag

    Outsider Observations

    A couple weeks ago I needed an adapter to go from the analog RCA phono plugs on my turntable to 1/4" plugs to a digital pre-amp borrowed from my son; so off I go to Radio Shack. As usual they have just what I needed. They also had a large selection of Skullcandy headphones; many on sale/clearence. I need better headphones; so I checked them out; read the specs; but they had no way to listen to them. In fact most were contained in sealed bubble wrap straight from a Shangai factory I suppose. I did not buy; I'd have to hear what I'm buying first. Walmart was across the street, so I checked out their headphones. No Skullcandy there; but many other low end phones. Again no way to listen; but then you expect that at Walmart. Skullcandy has a clever name, albeit somewhat limiting, so I would question the wisdom of them wanting Walmart shelf space.

    This brand struck my interest and thought I'd check their stock chart. The first thing I always look at is where the volume came into the stock as those are the most real prices Obviously the highest volume was the first day of trading (19.99 to 23.40). Been trading under that since; as low as 11.79. After the IPO it traded down to 11.81 in October. Then tried to reach to $20 in November, but volume nearing that level was way too weak to match the huge supply of stock for sale up there. On that run-up it did have a high volume day (2M shares) on Nov. 4th between $16.25 and $18.10. So, a lot of shares traded in that range and 16.25 is the current ceiling.

    On this last run up into earnings it couldn't even get into $16.25. That's not good. Supply was coming in. The day before earnings, price was up on 1.5M shares, but should have had more price appreciation; so again supply coming in. After earnings, the price fell hard off the top on 2.5M shares. It went down into the high of another high volume stick printed on Sept 30th between 13.34 and 14.43 on 1.4M shares.

    So, there was 2.5M shares coming down into 14.43 which printed 1.4M shares. Do you think 14.43 is going to hold? No way! Yesterday was a dead cat bounce. It will be down to 13.34 soon and may work that range between 13.34 to 14.43 for awhile. But when price comes off the top with force like it did; get out of town as it is done; going to the lows and probably lower. A miracle could happen and volume could dry up on a retest of those levels but its just not worth the risk.

    I do not have a position.

    Here's a chart; to get best view of volume relationships, use settings of 7 months, 10 days, 5 extra bars, candlesticks, landscape, volume-SEPARATE, log scale OFF, overlays-NONE, and use the "inspect" feature.

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    • So, if yesterday's much-higher-than-average volume and subsequent dip wasn't just insiders selling the 1st time they've been allowed to... then explain the sudden volume drop and price settling that's happening right now.

      Sometimes the answers aren't on a chart, and are really quite simple.

      Volume should return to average or even below average as we head towards the end of this week. I expect the price level to hold between 14.50 and 15, and I expect it to hover in that range until the next run up right before Q1 results. At which point we'll get an update on the Monster lawsuit and hope there are no additional costs associated. Assuming that is off the books, I think we'll see them raise 2012 guidance slightly.

    • TJ Maxx has discounted skullcandies which I buy because my kids want them. They are sometimes sold out at this store too.

    • My original intention was to go long, since its pretty crowded on the short side and the general market is still trending higher and we're still under a new moon, but I'm waiting. As it looks now, the only way I'd short this is on a low-volume retest of 16.05 or 16.10. If it gets over those and can't hold the price on lower volume, I'd be real tempted.

      You'll notice today that it closed at 14.42 just within the stick of Sept 30th with a high of 14.43. That high-volume stick of Sept 30th is one of only several times where a high volume of buyers and sellers met; where real supply met real demand. Today's volume was 1M shares, so the force is still down town and it closed in the lower range. So, I still expect to see 13.34 hit.

      But truth be told, as thin as this stock is, they could mark this thing right back up to the top, 16.10. But since it's in the middle of nowhere I don't have to make a decision. I only make decisions at support and resistance and/or swing points.

      If I was a long-term investor or a bagholder above 16.25, I'd be wishing for 13.34 first and not 16.10. Because if they mark it up there now, it will be on lower volume and it will be done, cooked, game over, time to look for another story. It really needs to consolidate for awhile before it makes another run at 16.10.

      I might go long on shrinking volume coming into 13.34, the low of the stick of Sept 30th. The problem with that is that the creek (resistance) would be 14.36; so my reward would only be about $1. The average true range (a basis for placing a stop) is about 70 cents so the poor reward to risk ratio would severely limit the number of shares I could commit to the trade.

      If the volume goes into 13.34 with accellerating volume I would stand aside and wait to see how it comes into 12.57, the stick of Dec 13th. That would probably be a better long trade for reward to risk ratio.

      If it breaks the low of Dec 13th, 11.79, on volume greater than 843,000 shares then the odds/probability of $8 is very high.

    • The IPO lockout DID end Jan 16th. However, insiders were still blacked out for the Q4/2011 financials to be released, nothing to do with the IPO blackout. Today was the 1st day they could sell since the IPO happened.

      They should be free to sell until they get blacked out for Q1 results, which should start sometime mid-March.

    • Another possibility: A Bear Trap reversal.

    • Ok. . . but wait. . . I paid for some independant research (not a fortune) that predicted a huge drop too. He was telling the truth. The technicals WERE there.

      The IPO lockup ended back in January 16 2012.

      I'm glad the stock is rallying.

      I like to give people the benefit of the doubt when I can.

    • What drop? It was in the green a couple min ago when I looked. Regardless, I can explain the dip this AM on high sell volume rather easily: Today was the first time employees and insiders have been able to sell since the IPO. They've been locked up since July. This is simply insiders with low share prices taking some profits off the table at once, because it's the first time they can. Honestly, I thought we'd see even more of a dip today because of this. The fact that the volume isn't higher means that a lot of employees think this stock is undervalued and are holding their shares. Losing .50cents on the first day employees can sell? Really not that bad.

      Just my 2 cents here, but whenever a person drops as much free advice as Mr. Onepoint has today, they have an angle. It seems he would like this stock to go down, because he's shorting.

    • You said you don't have a position so what is your interest here? Are you planning to purchase shares or are you shorting? If you are going to make a purchase what do you see as a safe entry point according to your charts? Lastly what are the odds of SKUL sliding to single digits ($8) if it falls through the last support level that you mentioned in an earlier post. TIA

    • Your insight was vindicated by today's drop. Good call, and thank you.

    • I'm not a chart expert, far from it, but onepoint could be very right about a further dip, at least a temporary one. Luckily the fundamentals on this stock are strong.

      • 1 Reply to johnlobur
      • That can be said of just about every stock in the universe. my problem with onepoint was this quote,"Radio Shack is clearing out Skullcandy. That is what retailers do when items are not selling."

        That is BS. All you have to do is go online and do a store check for Skull headphones and see for yourself. Not to mention EVERY Analyst that covers Skull said they were selling out at more than 50% of accounts. Charts are for day-traders, I'll stick to the fundamentals thank you very much. If the shorts take it down again I will add to my position.

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