Tessera Technologies (TSRA)

TSRA is a semiconductor designer that licenses to chipmakers. The stock had been held back because of patent infringement issues.

Price burst higher in May on an important patent infringement victory. It then put in a second stage four month base on base.

Last week price broke out on good volume. We didn’t recommend the stock because of lagging Relative Strength and what we felt was a lack of accumulation in the base. It also faces further litigation on its patent victory. An adverse ruling could cause a significant gap down in the stock as many potential licensees continue to contest TSRA’s victory.

But the break out was impressive and powerful price action can encourage an investor to put aside his concerns over flaws in the pattern. The current market uncertainty is pressuring the stock and bringing it back towards its buy point.

As we publish price is trying to stabilize. We’d be buyers over $24.90, which would establish a second intraday leg off the bottom and signal a greater likelihood of a turn in the stock.

Bear in mind the market is suffering today and we would not be buyers should the indices continue deteriorating. We would use today’s low as our stop, meaning that if price falls back into its pattern we no longer desire long exposure.