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Schizas’ Mailbag

CalAmp shares may be in for another great year Add to ...

Hey Lou,

Do you have an opinion on this recent high flyer, CalAmp, on the Nasdaq? I’ve recently have heard some glowing prognostications, looks as though it is going “parabolic”. Please advise.

Many thanks,

John

Hey John,

Thanks for the assignment.

This will be the first time that I examine the case for CalAmp Corporation. A quick look at the three-year chart tells the story of a stock that has been very generous to investors, especially over the last 52 weeks. The company has expertise in wireless access and computer technology. Mobile resource management generates 46 per cent of revenue while wireless networks account for 33 per cent. Direct broadcast satellite makes up the remaining 21 per cent of sales.

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An analysis of the charts will inform my comments on this opportunity.

The three-year chart illustrates the move off the September 2011 low of $2.70 which got the stock moving to its current price close to $30.00. The golden cross that surfaced in November of 2011 generated another signal that the advance had more to give which it certainly did. What is also evident is that there have been many retests of support along the 50- and 200-day moving averages as the shares moved higher which is a sign of strength. Finally the uptrend line that started in early 2013 has been tested but not breached.

The six-month chart outlines the $12.00 gap between the 50-day and the 200-day moving averages. In general I like to see these two running closer together so that if there is a retest of support along the 200-day moving average it’s not an anxiety inducing experience. The shares are meeting resistance near $30.00 which could lead to a retreat to support along the 50-day moving average near $25.00. The first attempt to break above $30.00 faced selling pressure on lower fourth-quarter guidance announced in late December 2013.

There is also a line of support near $24.00 which needs to be monitored closely. Below $24.00 there is a thin ledge at $21.00 and after that nothing until $19.00. The MACD and the RSI are not currently indicating that bounce off the 50-day moving average that started in late December is about to reverse itself.

Management has informed investors that they anticipate a strong second half of fiscal 2014 which you should take into account when deciding how to manage this opportunity. If you are excited about the story and understand the risks associated with a high multiple stock you could start to pick away at this one and accumulate a position on weakness.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lschizas@globeandmail.com.

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