|
PureBytes Links
Trading Reference Links
|
wong wrote:
> Hi All:
>
> Here's a great tech stock - LU (Lucent). Recently, negative news sent the
> stock price plunging downwards.
NW: Regarding buying on negative news, I am a natural born contrarian
(Aquarian) so my
gut instinct would tend to agree with you. However, looking at your LU chart,
it looks pre-mature
as there is not yet much base from which a strong rally could be expeted.
Another indication is
using Fibonacci to generate a possible downside target. In this case, I would
take the last swing up,
circa 57 to 85 = 28 and since it took out the last low (57) multiply by 1.618 =
45.30 and subtract that product from the high price of 85 = 39.69. So, I would
be inclined to take a look at LU if it continued down to the $40 area. Please
note, I am not predicting that it is going to $40, but rather identifying a
possible low risk level for entry. If the stock does get to $40, that would be
time for re-evaluation. Until then, a small long in sugar looks like a
relatively low risk to me.
Good Luck,
Norman
>
> 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
|