Next Week’s TiVo Trade Set-Ups (TIVO, DISH, SATS)

Posted in General 
May 15th, 2010

TiVo Inc. (NASDAQ: TIVO) was the daily implosion on Friday.  As noted for stocks to watch next week in our UNUSUAL SUSPECTS at 24/7 Wall Street, the stock was given a death-blow after Dish succeeded in getting the TiVo patent case involving Dish Network Corp. (NASDAQ: DISH) and EchoStar Corp. (NASDAQ: SATS) heard on appeal.  What we wanted to do for the week ahead after the huge volume spike was to come up with a trader take for support and resistance levels based on the current prices and based upon the old prices from before TiVo rallied so much.

Shares went from roughly $18.00 down over 41% to close at $10.16 Friday on more than 57 million shares.  This takes TIVO stock almost right where it was before its huge pop-up on winning the patent case in the first place.

As you can see on the chart here from StockCharts.com, you can forget about the key 50-day and 200-day moving averages offering much of anything.  If there is any takeaway in the moving averages, it is only that the 200-day at $11.97 (which will change each day) matters for resistance.  The 50-day average did not even have 50 sessions at the higher prices, explaining why the line goes straight up.

If you go back a year, it is $11.00 that had been the big pivot point and the hard line of resistance back before it won the patent case the first time around.  Above that was a resistance of $12.00, which coincides with the 200-day average right now.  That 200-day average will likely come down over a nickel a day this week and will then start to bleed off closer to 3 cents a day for another week or so.

As far as support, $10.00 had been a longer-term pivot level for support before its significant pop-up earlier this year.  Then there is a lower level of $8.60 to $9.05, which would be a harder support level than $10.00.  So, on downdrafts, S1- $10.00; S2 $9.05; S3- $8.65…

As far as RSI, stochastics, and MACD ar e concerned, you can probably throw those out the window for at least the next two weeks while this stock finds its own trading range.

As far as stock options, we almost always like to see just what the real volatility traders are pricing in for straddles.  It is almost always too expensive to buy both the PUT and CALL at the closest strike price, but we are looking at the $10 straddle for both MAY. The MAY $10 strike was $0.75 for the CALL and appears to be $0.57 for the PUTS.  With $0.16 of intrinsic value, TiVo stock still would have to rise above $11.32 or go down under $8.68 in the next week for the volatility to trade in MAY to make money.

As far as analyst calls yesterday, Lazard did cut the stock to HOLD from BUY.

An appeals court did set aside TiOo’s previous win against Dish Network Corp. (NASDAQ: DISH) and EchoStar Corp. (NASDAQ: SATS) in the patent case for digital video recorders.  It looks as though the federal circuit court for the U.S. Court of Appeals will review its own March decision.  Dish and EchoStar had changed the DVR technology to avoid infringing on the patents, but the court had ruled that the devices still used TiVo’s technology.  $300 million or more in past damage awards hangs in the balance.

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JON C. OGG

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