GIGM - Sector: Technology---Industry: Multimedia & Graphics Software

[Melf Elf]

Sold GIGM at 9.83.  Loss: 0.9%

Bought GIGM yesterday at 9.53 on the rally back to UNCH, off the 9.09 low.  Stop: 9.04, below the October 2 low.  Risk: a loss of 5.1%

Sorry, this site was down yesterday, so I couldn't post the trade in a timely manner, but that might be for the best, if I get busted out of the trade.  Again.   

Reason for trade:

The top of the Ascending triangle not only didn't hold, as support, it became resistance again on Thursday: the high got only to 9.98, and to 9.99 on Friday, then GIGM took out Thursday's low, and sold off on Friday, back toward the lows.

After that failure at the Top of the Ascending Triangle, a re-test of the October 2 low (9.05) looked marked, and possibly lower.

We got that re-test yesterday, but GIGM not only held the 9.05  low and didn't go lower, it:

1. Held almost smack on the up trendline coming off the 6.18 low.  A "third hit" to a trendline validates as support

2. Established the "missing" Data Point #4 off the 12.55 high for another pattern, and for another possible pattern breakout

3. Closed higher on the day

4. Put in a Bullish Hammer, off a possible DOUBLE bottom, and off the 6.18 trendline validation

5. Got an uptick in the MACD Histogram, after already showing a postive divergence (see next chart)

GIGM had some technical damage done the chart on that October 2 smackdown in the sector.  It's had time to repair that damage, while at the same time, has digested the better than 100% gain off the 6.18 low.  It gave back 27.9% from the 12.55 high to the 6.05 low.

That's "normal" in a Bull Market.

What wouldn't be "just a normal correction,"  would be if GIGM now takes out 9.05-9.09 support.  That would further damage the chart by busting the DOUBLE bottom, and by busting that up trendline off 6.18.   GIGM likely would be in for more of a correction.

I'm risking 5.1% on the idea that this has been "just a normal corection" in a longer-term Bullish trend.

Well, okay....6% since I already lost 0.9% when the top of the Ascending Triangle didn't hold.

Curses!   

Happy Halloween, by the way.      

[Melf Elf]

MACD

[Melf Elf]

Nice showing from GIGM yesterday, in difficult market conditions.

On Tuesday, it sold off from key resistance at the top of the May-August Symmetrical Triangle (purple trendline).  That "should have been" support, but the Bulls wimped on us at that trendline on October 24, and allowed the stock to close below it, at 9.84. 

 

As a result, GIGM got sent down to 9.09 and is attempting to dig itself out of a hole.  "The hole" is this area below the purple trendline, which is "ground level" for the stock to be bullish. 

We're in a Neutral Zone, as long as we remain in this hole; Bearish if the validated trendline down at blue #4, and if 9.05-9.09 support gets broken to the downside.

Resistance is right here, and on up:

1. Immediate resistance at the purple trendline (top of the May-September Symmetrical Triangle)

2. The down trendline (blue) off the 12.55 high

3. The entire Kumo (Cloud)

That's some pretty stiff resistance! 

If the overall chart weren't bullish, I'd "sell at known resistance," or not even be long in the first place, but the longer-term trend is bullish, and if GIGM can take out that purple trendline and remain above it, 14.88 will be back IN PLAY.

The Bulls have established a little short-term base over the past six sessions, from which they can begin to attack all of that resistance.  They need to do that almost immediately, and not dig themselves deeper into this hole, or it might become a "Hell Hole."

   

I'll post the intraday chart next, to illustrate what I mean about the short-term base.

[Melf Elf]

In the last six sessions after the infamous BULL WIMP at the purple trendline... 

...the Bulls have put in a Bullish Inverse Head & Shoulders bottom.  Although I'm never a stickler about volume being "textbook perfect," it looks pretty "textbook." 

1. The volume is heaviest in the Left Shoulder (lots of selling after the Bulls wimped at 9.974, on October 24).

2. The volume is less on the tank to 9.09 (The Head)

3. The volume dries up a bit in the Right Shoulder.

That looks fine.

It's only bullish if The Bulls can take out the 9.99 - 9.98 neckline, and remain above it.  If they can, a short-term target of 10.87 will be IN PLAY.

Math:

9.98 - Neckline (I take the more conservative of the 9.99 and 9.98)

9.09 - Low of the Head

9.98 - 9.09 = 0.89 Points added to 9.98 = Target: 10.87

The May-September Symmetrical Triangle target of 14.88 also will be back IN PLAY.

I'm long from 9.53.  If The Bulls wimp on me again , and allow the 9.60 low of this Right Shouder to get taken down, I'll sell for a fractional gain.

And, I'll probably say, "Curses!"     

[Melf Elf]

I'm long from 9.53.  If The Bulls wimp on me again , and allow the 9.60 low of this Right Shouder to get taken down, I'll sell for a fractional gain.

And, I'll probably say, "Curses!"     

Well-ll...the Bulls are showing signs of wimping on me again.

The neckline is 9.99-9.98.

The Top of the May-September Symmetrical Triangle (purple trendline on chart above) comes in today at 9.92654.

This morning's high: 9.94 ...

...then, instead of banging through that resistance, the Bulls gave it up, and slid all the way back near the low of the day.

Yeesh!   

Pain in the #$%# 

This Right Shoulder of the "possible" Inverse H&S also is getting too long in the tooth.  It shouldn't be as wide as the Left Shoulder.

Bottom line: I'm raising my stop to 9.69, which would be a new low for today.  I'm long from 9.53.

GIGM currently is BID 9.73...ASK 9.74

[Melf Elf]

Bottom line: I'm raising my stop to 9.69, which would be a new low for today. I'm long from 9.53.

GIGM currently is BID 9.73...ASK 9.74

Sold GIGM at 9.72.  Gain: 2%

After this morning's THIRD failure to get back above the top of the May-September Symmetrical triangle, and after seeing that GIGM was going to close near the low of the day, I decided not to wait for a print of 9.69, and to sell it.

This still could be fine, but I don't like that show of weakness, with GiGM finding that kind of resistance at what "should have been" support in the first place. 

[setravis]

This one has had a gain of +1,019.54% from 07/17/2004 to present. 

• GigaMedia Limited Earnings Call scheduled for Thu, Nov 9
Link...... http://biz.yahoo.com/cc/8/74648.html

This online software and gaming site had its stock dumped big-time about Oct. 1 due to legislation in the US to end online gaming, however, GIGM derives all of its revenue from Europe and Asia. It's MahJong game is extremely popular in China...and it last qtr saw 800+% growth, yet the PE is a relatively low 35.
I like it and I bet it doubles.

Support @ $9.73...9.53...9.04...8.10
Resistance @ $10.05...10.91...12.40

Recent CandleStick Analysis
Very Bullish
Nov-03-2006 Homing Pigeon 

Technicals
Stochastic is Bullish
Last Price Quote is:
-2.28%below 13-day EMA
-3.62%below 50-day EMA
RS Rating: 1 

Fundamentals
Earnings Expected on Nov 9

Key Data:
Market Cap (M): $604.69 
P/E Ratio: 35.09 

[ScottishTrader]

Hi guys, I just did a medium term play-by-play analysis of GIGM on my personal trading log - is a bit long to re-post here, but I thought you might be interested.

You can find it at http://www.3stocksonfire.org/trading/index.php?topic=7208.msg76008#msg76008

Cheers,

ST

[Melf Elf]

GIGM finally got through that 9.98-9.99 resistance.  Big volume on the print of 10.00. 

[David Randolph]

1. Introduction

GIGM was first introduced to www.3stocksonfire.org by Elite G. I made a few trades on the stock, some of them very rewarding, like that 65% trade between December 05 and February 06. I'm a long term bull on the company but since I didn't look at it for about 8 months or so I think this is a good time to study it one more time.

By the way, if you're new to 3 Stocks, please register to receive our free newsletter with 3 daily stock analysis.

2. Profile

GigaMedia Limited (GIGM), through its subsidiaries, engages in the development and license of entertainment software and provision of application services, and ownership and operation of an online games portal. It also provides broadband Internet access services. The company, through its subsidiary, Cambridge Entertainment Software, develops and licenses software solutions and application services, including online entertainment and social networking in the Internet-based entertainment markets. It also offers FunTown game portal, an Asian casual game portal that provides an online MahJong game site, as well as provides services, such as game clubs for players, tournaments related to FunTown's online casual games, and social networking. In addition, the company provides broadband Internet access services to consumer and corporate customers through various technologies and products, including cable modems, leased-lines, virtual private network, and other value-added services. GigaMedia was founded in 1997 and is headquartered in Taipei, Taiwan.

3. Technical Analysis
3.1. All History Chart



Nice IPO price for GIGM, right? Well, not so good for investors, what a collapse. This all history chart tells us nothing about the future price of GIGM, but helps us understand how IPO's, especially after an enormous market rise, can be a dangerous game.

3.2. Medium Term Chart



What a marvellous bullish trend that started about a year ago. A five fold advance  . Now it is important to know if the company is using this big advance phase to distribute shares to the public. That will be an important test. Also I need to check if fundamentals warrant this kind of rise. But, technical analysis, without a doubt, continues to say the way for GIGM is up !

3.3. Short Term Chart



After touching its long term support, actually today GIGM is breaking out of a consolidation phase. The stock seems tired of these levels and will try to push to new highs above $12.5.

This is getting interesting ... let's see what we got in respect to fundamentals.

4. Fundamental Analysis
4.1. Number of Shares Outstanding



(Sorry, I just love these excel colors  ). If you consider the scale, and of course you should always consider it, these are pretty stable numbers for the number of shares outstanding. Needless to say, I like that.

4.2. Liquidity



The balance sheet is getting weaker at GIGM. Debt is now $46 M. It was half of that number a year ago. Also there are $15.9 M in convertible debentures, I believe that is due to the Fun Town acquisition, if I recall correctly.

4.3. Revenues



Revenues fell in 2005 because the company was changing its business model, from an ISP to an internet gambling company. Now revenues are rising quarter after quarter, but the estimate for fiscal 2006 is still $72.35 M. The company sold $39 M in the first 6 months, so I think it will probably beat estimates. But, not considering the convertible debentures, the market cap is $524 M.

The revenue multiple is a rich 6.72. Let's see earnings ...

4.4. Profits



After an erratic period, EPS is definitely getting better. The 2006 estimate is $0.44, and GIGM made $0.22 a share in the first half of the year. With EPS of $0.44, the Price Earnings Ratio is 23.3.

5. General Overview

Q3 earnings are going to be out on November 9, that is next Thursday. The stock is breaking out today, but I wouldn't want to risk holding it for earnings, especially after the short term rise we're seeing now.

My brother lived in China for the past 6 months and he says gambling is completely illegal there. The Chinese government can prohibit access of Chinese citizens to Gigamedia's online gambling sites, or else forbide money transfers from banks to online gambling companies. This is why Macau is flourishing, it's the only place on China where people can gamble (the Chinese love gambling, which is why the government doesn't allow them).

All those ideas that I had about GIGM are cold now because of the Chinese law that I didn't knew all that well. Also, the recent American law against online gambling companies can be copy cat by other countries. 

I believe GIGM is overvalued at this point.

6. Trading Plan

I'm not buying or selling GIGM here, but of course I'll keep an eye on it, since it is such a "tradable" stock. Good luck to all holders of GIGM.

I'm making 3 analysis a day, recovering the 3 Stocks on Fire original spirit. If you would like to receive my analysis on your mailbox everyday, please register.

[Terliso]

GIGM was first introduced to www.3stocksonfire.org by Michael.

I thought EliteG's first introduced it to the board.... I wonder where's this wizard now

http://www.3stocksonfire.org/trading/index.php?topic=6757.0

[David Randolph]

That's what I said, Elite G. Just kidding 

We don't know where the man is, he just vanished 

[Se7en]

That's what I said, Elite G. Just kidding 

We don't know where the man is, he just vanished 

Beem him up Scotty!

Btw, great analysis David! 
Can you take a look at SIGA and NTRZ if you have the time? Tia!

[Amarens]

Joehoe!!!! Go GIGM go.

Still way in the red. Thought I set a stop loss but did not 

Amarens

[setravis]

 • GigaMedia to Report Third-Quarter 2006 Financial Results on November 9

GigaMedia Limited Earnings Conference Call (Q3 2006)
Scheduled to start Thu, Nov 9, 2006, 8:00 am Eastern

Link......  http://biz.yahoo.com/cc/8/74648.html


Technicals
13-day MA Cross Above 50-day MA

Last Price Quote is:
5.42%above 13-day MA
5.61%above 50-day MA
RS Rating: 1 

Fundamentals
Earnings Expected on Nov 9

Key Data:
Market Cap (M): $604.69 
P/E Ratio: 35.09