Mobileye ($MBLY) is a much anticipated Initial Public Offering due to come to market later this week. The company is “is the global leader in the design and development of software and related technologies for camera-based Advanced Driver Assistance Systems (“ADAS”) . The company’s technology keeps passengers safer on the roads, reduces the risks of traffic accidents, saves lives and has the potential to revolutionize the driving experience by enabling autonomous driving.” Boy do I dislike those generic, lawyer written, company descriptions…
SCROLL DOWN FOR THE CHARTS IF YOU ARE ONLY INTERESTED IN THE TRADE SETUP- BUT THE STORY IS IMPORTANT
MBLY is expected to go public this week and due to strong demand for the shares, the IPO range has been increased from $17-19 to $21-23. If MBLY is like other recent IPO’s with strong demand, it should open at a strong premium to that range. Unfortunately for most investors, getting involved at the IPO price is not an option, as the big institutions, who pay millions of dollars a year in commissions to the underwritng bankers, will receive most of the shares. The public will be forced to pay up on the open or to sit it out.
There appears to be another way to take advantage of the hype surrounding the MBLY IPO. That opportunity is in OmniVision Technologies ($OVTI) OmniVision is primarlly known for image sensors but “OmniVision has been able to diversify its revenue base by moving into the automotive and security markets. For example, its OV10630 solution was selected by Tesla Motors ($TSLA) to enable advanced rearview camera applications a year-and-a-half ago. This is an important design win for OmniVision, as Tesla is the pioneer in the electric car industry.”
Oftentimes people will look to take advantage of momentum in an area where there is a lot of hpye/demand by purchasing the stock of a competitor with a similar business. The business of OVTI looks similar enough to attract buyers who want to participate in demand for MBLY.
Here’s The Play
Sharing a similar business is not enough to put your money at risk in a stock. For me it comes down to perceived risk relative to perceived reward, so lets quit looking at the boring descriptions and instead look at the only thing that will pay us, price action!
This weekly chart shows the stock broke past multi-year resistance near 21 and that level held as support on the recent pullback. This action indicates strong demand in an uptrend which should continue.
This daily chart shows a higher low above the rising 50 day moving average. A stop below this level would make sense for a new entry.
Drilling down deeper to a 30 minute timeframe for the last 2 months shows the OVTI has had some trouble between 2290 and 2300. Above that “band of resistance” should bring upward momentum back into the name.
OVTI is in a strong uptrend on the weekly timeframe and it looks like the stock should be able to continue higher from these levels. Buying a small piece between 2250-2300 looks like a decent entry area. The momentum should continue above the recent resistance at 2309 and that is where I would add to the position. If you know my work, you know that I like to say “risk management is job #1!” Know your stop level and honor it. If the stock breaks below 2196 it will have made a “lower low” and lower lows are not part of the definition of an uptrend!