RSA Security — Quick Update

Just a quick note regarding Friday’s 3.9% drop on increased and above average volume to close below the 20-day EMA for the first time since the recent rally began. This is something to watch to see if it’s a pre-rally shakeout or an actual breakdown.

On the brighter side…

…we note that the weekly volume came in below average and stock has, so far, held above the lows of it’s month-long base, which contained two previous 1-day shakeouts below $17 (see chart).

Also worth mentioning is the fact that the apparent (but not real) breakout you see on the chart three days ago was suspect due to its low volume, so it’s not surprising for the stock to fall back into the base on such a headfake.

Also of note is the fact that RSAS’s annual report came out Thursday and it may have contained some warning signs, increased risks, disappointments, whatever. I haven’t had time to review it yet, although I did note the following text near the top of the MD&A: “[O]ur sales of authentication credentials for use by consumers are increasing. We sell most of our consumer authentication credentials on a subscription basis, with revenue being recognized over the course of several years. Accordingly, our deferred revenue balance will likely increase as we build consumer revenue.” This means KEEP YOUR EYE ON THE DEFERRED REVENUE LINE of the RSAS balance sheet. Cheers!

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