ROVI: Attractive From All Time Frames

On Wednesday (9-8-10), I initiated a position in ROVI as it broke above 45 on massive volume. I was in my school's library at the time, watching the streaming Level 2 quotes and noticed volume gaining momentum as the stock neared the all-important 45 dollar level. Although I wasn't able to watch it at the time, the real intraday break occurred as the offer lifted at 44.25.

As a position trader, I didn't concern myself about missing the break above 44.25 -- I was interested in a sustained move that would push the stock multiple points higher over a period of weeks/months. I had kept the 45 dollar level on my radar ever since the stock showed up in my scan a few weeks ago. That level had been holding as resistance on the daily time frame, with July highs of 44.96 and early September highs of 44.40. Despite ROVI's late-day retreat, I focused on the fact that there was massive volume on the day (2.8 million shares compared to the 30-day average of 1.1 million), thereby giving credence to the move. Currently, the stock is setting up well -- on the daily, it looks as if the next test of 45 may prove to be the true sustained breakout, as the bears' defense is likely wearing thin. The stock has been holding up very well within a base that has ranged from 41-45. More importantly, the base indicates accumulation, as up days have come on significantly higher volume than down days. The lack of down days on large volume indicates that institutions are holding shares and not dumping them -- a.k.a they're holding on for a higher move.

Another encouraging factor is how ROVI continues to make higher lows after the stock hit 41 in late August. This shows that buyers have real demand for the stock, as they aren't waiting for it to pull back to a previous low. Instead, they're picking up shares at successively higher prices -- a very bullish sign.

Taking a longer-term perspective, the weekly chart gives further support to the idea that ROVI is consolidating at all-time highs before it makes its next move higher. The stock's previous base (between 35 and 40) lasted 16 weeks, and the current base has lasted only 9 weeks so far, indicating that investors may need to show some patience before ROVI breaks out of its current base. I'm willing to give this position both time and space, as I believe the next sustained move could lead to 50/share (my stop is set at a break below 41). Based on the bullishness from all time frames, there's currently nothing to suggest otherwise.