QXM: Ahead Of Earnings

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QXM broke out of the Purple Wedge (Chart #1) ahead of April 21 earnings and was beautifully positioned to go higher. When earnings were released, "Cowen and Co. analyst Matthew Hoffman called revenue a "little light," but overall he said the company's earnings per share handily beat expectations."

"Handily beat expectations" sounds good, but QXM was called Gap Down after the release of earnings, which usually is an indication of "That's just for openers. The stock is going lower." One of the reasons for the Gap Down is that Matthew Hoffman also said, "The tardiness of the 4Q07 results highlights an ongoing concern, but the company does continue to make overall progress on disclosure," Hoffman wrote.

The ongoing concern about the tardiness of results has plagued both QXM and XING, and the comment about the company making progress on disclosure was as meaningless to the market as Stanley Ng's similar comment about XING because the REACTION in the market to both comments was to sell the stocks, and the "handily beat expectations" was ignored.

Lesson: Watch the market's REACTION to earnings reports.

Ahead of April earnings, QXM closed at 7.69. After tanking on earnings, the stock recovered and filled the 7.69 gap, printing 7.70 on May 16, prior to the news about the $70 million in convertible notes. After closing on May 16 at 7.52, QXM gapped up on Monday, May 19 to 7.68, printed a high of 7.69, then sold off.

So, technically, the RESPONSE to the fundamentals since the April 18 close has been a selloff and a recovery, and a problem getting through 7.68-7.70 resistance, which also is the top of a Symmetrical Triangle (Chart #2) If QXM can get through there, it would tell us that the market has received TWO earnings reports, has digested the news about the $70 million in convertible notes, and that it is willing to break the stock out (of the Symmetrical Triangle).

Next reistance would be the 7.85-7.88 highs, prior to April earnings, then the 200DMA, currently at 8.22.