Cramer's Profitable Frustration With the Chartists
Okay, you want to know what's wrong with technical analysis? I'll tell you what's wrong.
Thursday, I'm sitting at my desk minding my own business, watching tech trade down with reckless abandon. I see options guys coming in bopping the
Morgan Stanley High-Tech Index
(MSH) puts, I see call-selling in the semis, short-selling in the DRAM chip makers. It's all standard ugly. I've been there. Nothing unexpected.
And then it happens. A dramatic break-in call. A downgrade of
Ascend
at Salomon Smith Barney. A one-to-a-three. Technical downgrade.
"^%$#^%$^%$&^%$," I yell." %*&*^&%^&% him," I scream. "Give me that *&^%&^*%*&^chart book. %&^%#$^# , there is nothing wrong with that ^%%%$^% chart. That %&^& guy doesn't know jack about charts. He couldn't read a chart if his &%^$^%#% life depended on it."
I'm fuming. I'm not a chartist, but heck I can read a chart as good as anybody.
On Tuesday, when asked what stock I like for the near-term at a
Goldman Sachs
conference, I said Ascend, because of the build-out of the Internet. I told people that everybody who loved Ascend last year when it was at 60 hates it now that it is in the 30s. Now this &$&%& goes and downgrades it. Holy smokes! I feel like a complete jerk. Anybody who listened to me is going to panic out of the stock because of this $%$&^ &^&^$ technician.
"Maybe he's looking at the chart upside down," says Jeff, his dry sense of humor making me feel thirstier than a crawling rat 30 days in a desert.
Ascend starts sliding immediately. 33 goes to 32 and three quarters, to 32 and a half. I'm steamed. I'm livid. I quickly call home, to the only person who could make money just looking at a chart. The
Trading Goddess
has the charts right on the kitchen table. "Take a look at that Ascend chart," I tell her. "What do you see?"
"Stock wants to go higher," she says.
"Smith Barney just downgraded the stock technically," I tell her.
"That's wrong," she says. Hmmm, now I know where I get that certainty from.
I hang up the phone. I don't even remember if I said good bye or "gotta hop." And then I think to myself: "What am I doing?" I am not a chartist. I am a fundamentalist. This company has good prospects, I've done my homework, and now I have been given a gift, a downgrade by some chartist who can't read a chart.
"Buy me 50,000 shares, right here," I say to my trader, Mark Kantor. In 46 seconds I am long 50,000 shares of Ascend at 32.5"
For the next 90 minutes the stock hovers at this level. Now I am thinking, wow, this could be a self-fulfilling head-game this Smith Barney guy's playing. From an angle I see that if this downgrade can get the stock to below $31 someone will believe that Ascend has "failed," whatever the hell that is, and sell the stock.
And then it happens the other way. The reason why I love this game.
SoundView
, the fundamental tech house, does a break-in call. Upping Ascend to a buy from a hold. The stock reverses and in no time it is at $34.
But that's not all. Forty minutes later
Robertson Stephens
, another heavy-duty tech house, pushes Ascend. Hard. Favorite idea. That kind of stuff. It ramps to $34.75 and I sell my 50,000, leaving my core gigunda long position on.
"Why don't you call that $$^%$^%$& and tell him that the chart looks darn good again, maybe he will upgrade it?" I yell out to nobody in particular on my desk. "Serves the no good $^%$%$% right. Right in his ^%^$%^&$% face."
That two-and-a-half points booked is a good day's work. Right on the back of some technical analyst who created a fabulous opportunity for me, a fundamental guy. So if you ask me, let's get some more chartists playing this game.
Because if they are as Wrong as this guy, there are fortunes to be made by taking the other side of these entrail-tarot-card-tea-leaf-palm reading jugheads.
*************
Random Musings:
Site's been red-hot with all that doctor biotech kind of stuff. Gotta love it...
Thanks to all of my secret backers at the
Journal/Dow Jones
. I know the risks you take when you e-mail me your support. Don't worry, I won't let your hard work -- and man, is that paper thick -- be ground away by the Beast and its backers on the 17th floor, or wherever those guys hide during the day when you are out hustling for ads and stories...
Good piece by old mentor James Q. Wilson on the
Journal
editorial page today. He taught me everything I know about Government and was a dynamite Celtics fan during his stint at Harvard. Painful for this Dr. J backer, though.
James J. Cramer is manager of a hedge fund and co-chairman of TheStreet.com. At time of publication his fund is long Ascend. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Mr. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he welcomes your feedback, emailed to
Jjc@thestreet.com.