I open up my copy of
The New York Times
today, and what do I see?
mug. Geez, I can't get away from that guy.
Anyway, Herb is featured in a
ad that touts some of his recent -- and admittedly prescient -- calls. Specifically the ad notes his red flags on
, both of which have dropped significantly since he alerted us.
All this got me thinking: Could I have seen the same thing as Herb? Or if not, could I have used Herb's columns in conjunction with my own analysis? I mean, the man has been on a tear lately, so maybe there's something to the fundamental mumbo-jumbo.
Therefore, today I'll look at the two charts Herb mentioned and I'll explain what I would have done with his information. My feeling is that there's a lot of synergy on the site, but that the
columnists probably need to take better advantage of it. Given that, let's see if we can make some headway.
Quoting from the ad: "2/1/99 -- Herb G. says trouble ahead for Family Golf Centers Inc. (FGCI). BY 8/13/99 STOCK DROPS 69%!"
Therefore, let's see how the chart looked the day we would have been reading Herb's column.
OK, assuming we felt comfortable combining Herb's wisdom with chart analysis and decided to go short, let's skip ahead to the next key date, Feb. 16.
Hmmm. That's a pretty big gain in a short period of time, and probably wise to cover at that point. But what if we felt the story wasn't getting any better and decided to hold?
So there's certainly no argument. Herb made us a ton of money, and the longer we held the better. Technically, the chart didn't look strong when he warned us of FGCI, so it certainly would have been appropriate to go short the day we read his column.
As for holding out for the really huge gain, I'd shy away from that. My feeling is that when I get a windfall profit in a short amount of time, I say thank you and move on. It's very difficult to hang around for months on end with an open short position, as you're betting against upgrades, takeovers, bottom fishers and the overall bull market. Still, in this case, it would have paid off handsomely, particularly if you had no better place for your money.
The other chart highlighted in the ad, was HLYW. "6/30/99 - Herb G.
red-flags Hollywood Entertainment (HLYW). By 8/19/99 THE STOCK IS DOWN 36%."
Like FGCI, let's look at this stock the day Herb's column appeared.
So, if we were looking to combine TA and Herb's thoughts, we'd only short on a breakdown. Therefore, let's see what happened.
Here's a chart, then, where you really needed to be a believer in the fundamentals, or in this case, lack thereof. Using TA would have gotten you a win, but not much to speak about.
So what can I conclude from all this? A few things. First, I think Herb is a first-rate reporter, and you can make money off him, charts or no charts. However, I am always more comfortable combining the two approaches, as you then have a lot of factors for a successful trade going your way. We've seen that on the long side with the
TF II contest, and it's no different on the short side.
You can argue, of course, that by waiting for everything to line up, we would have cost ourselves a super trade with HLYW. I'd counter, though, that you'd also have taken a lot less risk.
wrote a few weeks ago about how to use
to your advantage. Combining what you read here (and/or what
adds) with the likes of Herb,
and many others, is yet another excellent way to not only enjoy
, but make some money, too. I mean, really: Should Herb be the only one smiling?
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. At the 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