A Forgotten Tech Name Is Breaking Out

Includes: CSCO, DVMT, HP, SY
by: Moby Waller

A technology storage maker that was a "hot stock" of the 1990s is quietly breaking out to its highest levels in about 15 years. The company is Sybase (SY).

Taking a quick look at the fundamentals, its kind of a mixed bag. The company is heavily reliant on one major customer EMC (EMC), which is always a risk ... yet it may be well-positioned to benefit from coming broadband pipeline growth via Cisco (NASDAQ:CSCO) and others. In addition, one prominent commentator speculated that it would be a good fit for an acquisition by Hewlett-Packard (NYSE:HP).

Trailing and forward P/E averages about in the 20 area, profit margins are close to 20% (healthy, as stocks in this sector usually are), quarterly revenues grew about 9%. Debt is not a major issue and no dividends are paid. Short interest is fairly high at about 13% of the float.

But let's take a look at the charts, which tell the story of the stock in pictures:

The first chart is about 20 years of monthly data, on a monthly closing line basis. You can see that the stock peaked out originally in the early-1990s, well before the "internet bubble" and the parabolic upmoves of many tech. stocks. Of note on here to me is the heavy volume of the uptrend in recent years. In addition, one could give upside targets as high as 70 just based on past data.

SY Monthly Chart

Breaking it down to a Weekly Basis, you can see that since bottoming in late-2008 (months before the March 2009 broad market bottom), SY shares have been in a sharp uptrend. Pullbacks to the bottom of this range drawn by trendlines have proven to be good buying opportunities.

SY Weekly Chart

Now to the most relevant chart for options traders and swing traders, the Daily Chart. You can see below that we had a breakout in recent days above the 45 level, which looks very significant. The 44/45 area should contain any pullbacks.

SY Daily Chart

Bottom-Line: I'm not convinced this is a great long-term fundamental buy, but the ideas about future growth and possible takeover are intriguing. On a shorter-term basis, a pullback to 45/44 looks to be a very good entry point for a bullish trade. First upside target would be 50.

Author's Disclosure:
no current position in the stock or its options.

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