We have a good example this morning to showcase some technical analysis ... along with some chicanery.

I almost put shorts on Skyworks Solutions (SWKS) and RF Micro Devices (RFMD) early this week simply as a hedge since neither of these stocks has been able to make headway while the markets enjoyed a great run last week (of course continuing this week). We still maintain a small long holding in both but we've cut back position size in multiple iterations as they've broken support, and once more technical analysis has helped save us in the pocketbook.


Once their 50 day moving averages were broken we moved aside - we did a similar maneuver in Perfect World (PWRD) this week but in that case the stock simply reversed immediately back upward.


Nothing works all the time, but having a consistent strategy and being (mostly) robotic about executing on it, is something I've found to be key. (also to be fair, while Perfect World traded underneath the 50 day moving average intraday - triggering our judicious stop loss - it appears to have held on by a hair on a closing basis)


So that's the lesson on technical analysis - here is the lesson on the game is rigged aka why the small or naive investor has a 90%+ chance of being fleeced on a monthly basis. Options expiration for October is today... meaning if you place any new purchases in the options market this week you have to be done with your trade by today. That gives you almost no time (1-5 days in the option market is like a ticking time bomb). But someone was so confidant that RF Micro would blow up this week he was happy to buy 4900 October 5 puts on Wednesday. Meaning he had to be right within 2 days.

  • The stock closed Wednesday off 0.6% to $4.72, and one trader expects the shares to fall further by Friday's expiration..... show the purchase of 4,900 of the October 5 puts for 40 cents.

Of course you can see he just made a killing as the stock was slapped silly yesterday, on a flattish day for the market. Those bad boys rallied 30 cents Thursday - you can do the math from there. So as you can see - someone obviously had information about either Nokia or something else to so confidantely buy a slew of puts that only had 2 days of life left.

If the SEC were a viable organization they would investigate these things... and trust me folks, after about 10 years of following the option markets, this stuff happens ALL the time.

So conveniently Nokia (NOK) had a less than inspiring quarter and RF Micro Devices (as a supplier) took the brunt of it. Boo Yah free and open markets ... boo yah.

  • RF Micro Devices (RFMD) shares are getting roughed up by investors concerned that the troubles at Nokia (NOK) will overflow onto the company’s suppliers. And RF Micro may be the most vulnerable: in its most recent year the company received 52% of its revenue from the mobile phone giant. The news is also taking a toll on RF Micro rival Skyworks (SWKS).

While it's fair to associate RFMD with Nokia due to its heavy revenue concentration, its also fair to ask what someone knew Wednesday. It's also fair to suggest the SEC won't bother to ask these questions.

I'll be interested in seeing what RFMD does Monday after the pressure of this put play is done with.

Long RF Micro Devices, Skyworks in fund; no personal positions