Cavium Inc (NASDAQ: CAVM)

Cavium, Inc. designs, develops, and markets semiconductor processors for intelligent and secure networks. It offers integrated semiconductors that provide single or multiple cores of processors with intelligent layer 2 through 7 processing for enterprise network, data center, broadband and consumer, and access and service provider markets. The company’s products also include a suite of embedded security protocols that enable unified threat management, secure connectivity, network perimeter protection, deep packet inspection, network virtualization, broadband gateways, third generation/fourth generation wireless infrastructure, storage systems, wireless high-definition multimedia interface, cable replacement, and embedded video applications. In addition, it provides embedded Linux operating systems, development tools, application software stacks, support, and services. The company offers its products under the OCTEON, OCTEON Plus, OCTEON II, OCTEON Fusion, FusionStack, NITROX, NEURON, Celestial, ECONA, PureVu, and WiVu trademarks. It sells its products to providers of networking, wireless, storage, and consumer electronic equipment directly or through contract manufacturing organizations and distributors.

To analyze the company’s stock for potential trading opportunities, please take a look at the 1-year chart of CAVM (Cavium, Inc.) below with my added notations:

1-year chart of CAVM (Cavium, Inc.)

For the last (9) months CAVM has been holding a level of support at $30 (black). After a brief dip below that level last week, the stock has now gotten back above $30. Assuming the stock moves as it has in the past, a rise to the $36 resistance (blue) should be in the cards.

The Tale of the Tape: CAVM has a key level at $30. A long position could be entered at the $30 support with a stop placed under that level. A short play could be made on a break below $30.

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Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!

Good luck!

Christian Tharp, CMT