HIMX – Back From The Dead?

I bought HIMX April 8 calls today.

HIMX has been an interesting stock to watch for the last few weeks.  After bottoming below $5, the stock has rallied aggressively into the $7s and is breaking out of its recent range this morning.

Let’s look at the details from the normal charts.  Starting with the daily chart:

HIMX 1.png

Chart from FreeStockCharts.com

We had a nice run to get off the bottom with momentum.  Then, we consolidated for about 2 weeks in a range between 6.73 and 7.55 (with most of the action between 6.90 and 7.25).  Today, HIMX is presenting at the Nomura Asia Tech Toru in Taipei.  I imagine that was the catalyst for some of the buying, but frankly, I don’t know for sure.  My key here is to know that everyone that sold in the last couple of months is losing money and we look like we should push to the 200 Day Moving Average and perhaps to the ~$9.20 range that we struggled to break through after the last gap down almost 6 months ago.

Looking at the hourly chart, we can see the breakout this morning a bit more clearly:

HIMX 2.png

Chart from FreeStockCharts.com

I’m seeing some good action here but there’s no way I want to get involved unless I can get leverage for cheap.  We could buy the equity with a stop at the prior high ($7.55) to get good defined risk, but there’s no leverage and we might get stopped out before the next run.  To be clear, this is not always a bad thing, but only if we get back in on the next technical signal, which is not always easy.  If the options are cheap, we can get defined risk in case this breakout fails and we can get leverage if we run toward $9+.

Now I’ll look into the options markets to see if we can get that leverage:

HIMX 3.png

Chart from LiveVol

This is clear and interesting to me.  The realized volatility has been high recently as the stock picks up momentum and the Implied Volatilty is at lows.  So now, it’s just about doing some math.

I want some time in case we get a 1-to-2 week consolidation after this move like we did 2 weeks ago.  I need to look at April calls here.  The April $8 calls for 30-35 cents are interesting for this play.  On a move to the prior high of $9.20, they would be worth $1.20+.  So, I’d be looking at a 3- or 4-to-1 R&R with a decent probability of getting short covering.  Remember that if the rally happens sooner, the premium will pick up sooner, so either the value would be above $1.20 on a full move or we could take money on a move to ~$8.90 if we wish.  Either way, I really like the momentum here to repeat some of what we saw in mid-February and look for that move into the $9s, and so I’ll play for this move with April $8 calls.

 

 

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