Monday, November 1, 2010

Kulicke & Soffa Industries Inc. (NASDQA: KLIC) Q4 2010 Analysis

Recent price: 7.33$
P/E Ratio: -
3 month Target Price: 8.20$

Company Description
Kulicke & Soffa Industries is a global leader in the design and manufacture of semiconductor assembly equipment. As one of the pioneers of the industry, K&S has provided customers with market leading packaging solutions for decades. In recent years K&S has expanded its product offerings through strategic acquisitions, adding die bonding, wedge bonding and a broader range of expendable tools to its core ball bonding products. Combined with its extensive expertise in process technology, K&S is well positioned to help customers meet the challenges of assembling the next-generation semiconductor devices

Confidence Margins
Strong resistance $8.21 (+12%)
Light resistance $7.50 (+2%)
Light support $6.65 (-9%)
Strong support $6.00 (-18%)

This is a very speculative trade because the company has experienced losses over the last year. The company should however be able to surprise analysts. However, due to improving economic conditions, this trade could be very profitable.

Entry strategy
For the cautious investor:
Buy the stock for 7.33$ or less.

For the risk-taking trader:
Buy 8$ December out of the money call options for about 10$ a contract.
Because of the speculative aspect of this trade, try to keep the supports on watch if you feel uncomfortable with a potential downward movement.

Watch the stock closely as the earning release date approaches. If the resulting price is satisfying, sell the call options as an up price movement happens.

Exit Strategy
For the cautious investor:
Sell when the stock reaches 8.20$, or keep it until about 9.00$ if you are very bullish.

For the risk-taking trader:
These options are currently undervalued and their prices anticipate a negative earnings report from the company and they should greatly appreciate following a positive move of the stock.

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