Here's a question: Why isn't there anyone writing about technical analysis for
? Or, for that matter,
The Wall Street Journal
The New York Times
The Washington Post
and so on?
has Andy Serwer writing, so we know quality isn't an issue. (Ha ha! Just a little joke. Actually, I like Serwer's stuff.)
Still, if they could just get past their "TA is some sort of witchcraft" thinking (and I'm betting dollars to doughnuts that's what it is) and admit that maybe TA has some itty-bitty bit of validity (hey, a pretty good ditty!), then boy, they'd make an already fine publication even finer.
has that kind of foresight, and thankfully the darn good taste to employ yours truly.
Therefore, for both today and Monday's column, a special "GBS takes on
" series. Specifically, I'll digest, analyze and make specific recommendations on
10 Stocks to Grow With column of Aug. 16.
Why this focus? Well, for one, with the market the way it is, it's probably not a bad idea to take one step back and think about the long term. Don't get me wrong, my short-term trading is great lately, and I'm way ahead of the market for the past few weeks. On the other hand, I'm having to work like crazy, and I think I'm at break-even.
Therefore, I thought it might be nice to look at
list of buy-and-holds, if you will, and give them the TA once-over.
Also, I'm on semivacation -- in Pittsburgh! -- and when I'm in relax mode, I often drift into long-term
thinking. Given all this,
here I come!
As set up, then, the 10 stocks
listed as ones to "grow with" are:
American International Group
Johnson & Johnson
Furthermore, let's stipulate that
did its homework and its fundamental analysis is up to snuff. I won't have the temerity to question them there, as I'm sure all their price-to-earnings ratios, revenue growth figures and other mumbo-jumbo are accurate. Really, though, who knows? I'm of the opinion all that stuff is a crapshoot anyway -- but at least the article was well-written.
Finally, since I'm going to take a long-term view, I'll look at weekly or sometimes monthly charts. This is different than my normal daily charts, but since we're talking long term, it's only appropriate.
Therefore, let the analysis begin! First stock up is AIG, and I'll give this one a tentative thumbs up. You can see on the chart, the long-term trend since 1991 is most distinctly up. The interesting thing right now is that AIG has pulled back to its breakout area of early 1999. Therefore, if you want to enter with fairly low risk, now is the time. Of course, entering when AIG is close to its trend line would be even less risky, but that opportunity might not present itself. Instead, I might buy some now and some later if it drifts down further. I usually don't recommend averaging down, but since we're talking a long-term hold, we can probably get away with it here.
Next stock up is BMY. This chart is similar to AIG's: a strong upward trend, with the only sizable dip coming this past October. And as long as BMY continues this trend, there's absolutely nothing wrong with the stock.
However, the only thing that bothers me about this monthly chart is BMY's moonshot rise since 1994. Up nearly 400%, it just feels like it needs a rest. Still, it's certainly not broken, so I can't rightfully say pass. Nevertheless, let's put BMY in the "tentative buy" category.
Unlike many of the other stocks, Cisco is certainly not new to either this column or my segment on the "TheStreet.com" TV show. In fact,
and I discussed CSCO this past Friday, and both of us liked it a lot. At that time, the stock had pulled back to a great entry point, and I suggested going long the following Monday. So far, so good.
However, on a long-term basis, CSCO might even look better. The chart below is a monthly one, and what do you see here? Right, an almost flawless uptrend. Honestly, I can't find a nick or ding in this one. And coupled with the fundamental story, this would be
stock I'd pick, if I had to have only one in my portfolio.
On the flip side of CSCO is
selection of Ford. Here I'd be a little hesitant for one reason: There have been periods of time, spanning years, in which Ford has shown serious underperformance. And right now could be one of those times.
You see, unlike most of the aforementioned stocks, F moves in fits and starts, with the current environment being a "fit." Right now, it is certainly not clear what the resolution will be, as the stock could move up or down dramatically. What is clear, however, is that this is a time of congestion. And in that environment, I'd just as soon pass until the situation is resolved. Therefore, I'd buy F only if it again made a new high. In this case, maybe we miss a few points of upside, but we sure avoid any nastiness on the downside.
The final stock I'll look at today is Home Depot. Here's a stock that's been loved for quite a while, so I was surprised when I looked at the monthly chart and found there were years and years in the early '90s when HD essentially did nothing. Boy, talk about sideways movement: Here's one stock that went flatline for nearly five years.
It's with that in the back of my mind that I say HD looks OK and is certainly a stock you won't get hurt on. However, if the past is any indication, it's also a stock that can often return less than a savings account for years on end. I'd still be a buyer of HD, but it certainly wouldn't be the cornerstone of my portfolio.
So, at the halfway point,
selections look pretty good. CSCO is clearly a standout, while F is a bit iffy. On Monday, I'll conclude with IBM, Johnson & Johnson, MCI WorldCom, Tyco and UAL.
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At time of publication, he held no positions in any securities mentioned in this column, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith writes five technical analysis columns for TheStreet.com each week, including Technician's Take, Charted Territory and TSC Technical Forum. While he cannot provide investment advice or recommendations, he welcomes your feedback at