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Wong,
While LU may be a great company, I have observed over the years, that large cap
widely held issues are prone to very severe corrections, which often last a
VERY long time. Examples that spring to mind are, MU in 1995, CS in 1996, and
DIS in 1998. In this regard, the daddy of them all was IBM, which took 6 years
from the top in 1987, to lose 75% of it's value.
LU is currently THE most widely held issue in this country.
Just another opinion.
Martin.
wong wrote:
> Hi All:
>
> Here's a great tech stock - LU (Lucent). Recently, negative news sent the
> stock price plunging downwards.
>
> Please refer to the attached weekly chart of LU.
>
> I would like to go long on LU or its Jan2002 leaps (more venturesome ones
> may want to buy the Jan2001 leaps instead).
>
> I would base (very loosely) my decision on confirmation of any 2 indicators
> - as usual, in oversold areas and just reverse direction to the upside etc
> etc. (For refinement, one might want to look at the daily chart with
> indicators as well.)
>
> Note that because of the infrequent sharp drop, for the wb_dema indicator,
> I might view the upward reversal NOT at zero line, but the yellow line I've
> inserted. This concept of NOT using the zero line is very loosely based on
> Appel and Hitschler's "Stock Market Trading Systems" (198) - drastic
> oversold conditions which rarely occur but relatively safe to enter long.
>
> Of course there's no guarantee after one goes long, LU will not continue
> its downward movement again. In such case, I would not mind averaging
> down. (That's why I prefer the Jan2002 series.)
>
> Things are relative. Buying stocks and calls in a BULL market is great
> fun. But when the bull is finished and when BEAR reigns, the above won't
> work any more. So before one buys LU and/or LU leaps, one has to decide
> whether the present bull market will still continue to exist in the future,
> and of course one can never be sure if the bear market has begun until
> afterwards - hindsight !! ...
>
> When I talk about averaging down, I usually bring up Lichello's "How to
> Make $1,000,000 in the Stock Market Automatically!" - the AIM system.
>
> Just an off-topic observation, here's Lichello applying the AIM principle
> on ordinary daily life matters (cf Signet paperback 3rd revised edition Jul
> 1992 - page 209):
>
> He said:
>
> "... Well, I bought a jar of instant coffee at a supermarket recently for
> $4.95, and then, at a second supermarket, saw the same item on sale for
> $3.49. So I used the AIM principle and bought two jars at that price.
> Result: I'd bought three jars for $3.85 each! Not a bad price at all..."
>
> I used to kick myself when I bought something at regular price and then 15
> minutes later I saw the same product selling for maybe 50% less. Now I
> will buy more of the same product at the discount price, provided, of
> course, it's in good condition...
>
> Regards,
>
> Wong
>
> Regards,
>
> Wong
> =========================================
> Previously I wrote:
> >A better way to enter long may be to wait for at least 2 indicators to
> confirm buying.
>
> >I would rather risk missing going long than entering too soon.
>
> Attachment Converted: "c:\eudora\attach\orcl-back in 1998.gif"
>
> ------------------------------------------------------------------------
> Name: LU-weekly.gif
> LU-weekly.gif Type: GIF Image (image/gif)
> Encoding: base64
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