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Hi Jim,
My indicators gave a strong buy signals on Thursday close, I am not totaly convinced that if the rally will
last for long though, after the rally I think we will test the low's again (7400). The intermediate term is still
caught in a declining channel. I suggest putting trailing stops to protect profits.
Regards,
melesse
> From JimGinVA@xxxxxxxxxxxxx Sat Oct 10 12:10:58 1998
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> All,
> What a week! I was stopped out of my DELL position Monday. Then all H... broke loose Thursday. I looked at the charts hard Thursday night and as I said in my Friday post, thought that we had just experienced a blow-off bottom. Only time will tell if that's true or not, but let me expand on my thinking a little bit. A classic blow-off bottom is one in which the market reaches new lows on extraordinary high volume, lots of new lows are reached, and everyone is extremely negative and the market recovers rapidly from there. Looking at the first condition, it's true that the DJIA didn't reached new lows but instead bounced off the bottom of it's Horizontal Channel (HC). However, the DJIA just represents 30 stocks, not the market. All the broad market indices did reach new lows on the third highest volume day in history. There were over 2200 new lows on the NASDAQ and over 1200 new lows on the NYSE. The put/call ratio was at a multiyear high. Analyst's were droppin!
!
g their earnings estimates and bearish sentiment was high. To me the evidence supported that Thursday was a blow-off bottom. The question then, was what to do?
> I decided to take a position in well know former market leaders that were still in a Short Term Down Trend Channel (STDTC). However, since they were still in a STDTC, I would protect myself with a close stop under the Thursday low and take a position only half my normal size. Then when/if they broke out of the STDTC, I'd double my position size. The stocks I picked were America On Line (AOL), Dell Computer (DELL), CitiGroup (CCI - the newly merged combination of Traveler's Group and CitiBank), and MicroSoft (MSFT). I opened a position in each Friday morning. That left me with long stock positions in AOL, CCI, DELL, EGGS, MSFT, NR, and SCH as well as the old TRV LEAPS which have been converted to CCI LEAPS.
> Monday I'm going to add the other half of the CCI position which did break out of its STDTC Friday. Some of the others are also close to the top of their STDTCs and I'll be adding to those positions when/if they break out during the week. I also want to add another Fallen Angel, Christmas Special, or whatever you want to call the low priced beaten down stocks. I narrowed my selection to Cypress Semi (CY), Labor Ready Inc. (LBOR), and Oxford Health (OXHP) and finally decide on CY mainly because I also had a MS buy signal for it.
> CCI at 35.4375 bounced off the bottom of a long term up trend channel Thursday and gapped up on good volume to break out of a STDTC Friday. Based on performa data, it hit an all time high just under 70 on 4/6/98 then fell back and moved up again to set a double peak just under 70 again on 7/21/98. From there it went into free fall to a low of 28 1/2 on Thursday, but closed 4 points higher. So Thursday and Friday were both up days on good volume. The Binary Wave Composite just turned positive and QStick is still negative but rising. The fundamentals are great with a PE of 11.8, price/sales of 0.89, ROE of 19%, Debt/equity of 1.46, and annual sales growth of 72% and earnings growth of 33%. I'll add to my position Monday and leave my stop at 27 3/4 for now. I'll change my stop to just under the new Short Term Up Trend Channel (STUTC) just as soon as we get enough data to construct one.
> CY at 8.4375 is in a Horizontal Channel (HC) with the top at 11 and the bottom at 5 1/2. It hit a 52 week high of almost 19 on 9/5/97 then fell from there to a low of 5 1/2 on 9/1/98. From there it rose to break out of its Intermediate Term Down Trend Channel in mid Sep and hit a peak of a little over 9 at the end of September. It then fell to a low of 8.625 on Thursday and rose to its current position Friday. I got a MS6.5 Tema PV Binary Wave, QStick buy signal a little over a week ago. The fundamentals aren't as good on this one but that's to be expected. The price/sales is at 1.48, the debt/equity at 0.32. Earnings are negative and sales have dropped. The good news is that the worst might be over and the sales drop has flattened. I'll open a long position Monday. I'll set the target at 18, just under last years high and, for now, will set the stop at 7 1/2 which was the reaction low just prior to breaking out of the ITDTC. If we get a move above 9 3/8, I'!
!
ll construct a new STUTC and set the low just under it.
> I'll send copies of the CCI and CY GIF charts to everyone on the email list. If you aren't on the list and want on, just yell.
>
> JimG
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