Reader Request: Rubicon Technology

By | October 26, 2014

Peter requested my technical take on Rubicon Technologies:

26. RBCN weekly chart

Rubicon Technologies (RBCN) makes scratch-resistant sapphire screen displays for smartphones and smart watches. There have been fundamental issues regarding the product and competition in the space, and the net effect on the company’s profitability is evident on the weekly chart. This chart also provides context to a more defined technical analysis.

26. RBCN RBCN daily vol chart

This month a positive volume spike more than 400% greater than the 50 day moving average of volume, can be seen on the first daily chart. In the past after one day spikes of this magnitude there have been periods of follow-through buying, and the same can be said for follow-through selling after extreme down volume days. One notable exception is last August after a disappointing earnings report, the stock gapped sharply lower on volume that was over 400 times than the 50 day average. After the drop, however, it did manage a significant bounce into the end of the month before returning to trend and continuing lower. This is another layer of context to incorporate into a trading decision.

26. RBCN daily squeeze chart

The second weekly chart shows more clearly a small “diamond” pattern which formed over the last month. Diamond formations are made up of two parts, an expanding triangle pattern followed by a symmetrical triangle pattern, and are usually seen at major tops. Also of note on this daily chart are the Bollinger Bands, a measure of standard deviation around price, which are located inside the Keltner Channels, a measure of standard deviation around Average True Range. This condition is one way of defining when a stock is being “squeezed,” a precursor to price volatility.

The company reports earnings after the close on Monday (10/27) and the diamond pattern, the “squeeze” condition, and a 23% short interest in the stock are suggesting there will be volatility associated with the release.

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