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Charted Territory: Playing Big Blue; the Right Way to Be Wrong

Big Blue World

"A resurgent IBM is coming up short on space." "IBM in deal with IDT." "IBM says double-digit growth." Jeez, you can't get rid of these guys. I'm even paging through

Golf Digest

and see, "Lou Gerstner, 13 handicap." Okay, they're hot, hot, hot! So, how are you going to play it? Well, ask me -- the perfect



contrarian signal.

Yes, folks, here's your Big Blue game plan: Do the exact opposite of whatever I'm going to do with IBM. I'm buying; you should be selling. I go short; you go long. Guaranteed 100% effective.

Now, the truth is I rarely trade IBM, because it never seems to fit either my long or short parameters. But, my wife's stock options (she works there) are hanging over me like a 10-ton ax. All right, maybe that's an exaggeration, as having them is actually a good problem. Like many forms of executive compensation, these options only provide for the upside.

If the stock tanks? Well, she earns less, but it's not like she has to meet a margin call. Plus I'm only ever faced with one decision: either sell them or hold them. My problem: I never -- I mean never -- get it right.

Take a look at this

last week I'd buy



? Boy, shame on


for not calling me on that selection (just take a look at its

chart). Yep, that one was incorrect. Flat out wrong. Bad trade.

I'll tell you something, though. I make a lot of them. A whole bunch. Thousands, in fact. But, here's a quick check to know whether you're progressing as a trader: Bad trades don't bother you. You can accept all trades -- good and bad -- as just another statistic. No backslapping when you nailed one. No hangdog when it sinks. As long as you execute correctly, then every trade is just another wager with the odds in your favor. Disney bombed? So what. Time to move on. Reach that kind of perspective, and you'll have few peers in the trading arena.

Rockin' My World

A nice reader emailed me the other day and said he'd like to get in on that



action, and asked whether I have any opinions? Now, you can probably guess my reaction: Avoid at all costs! Of course, that's the easy way out. But, I thought, what if I


to play K-tel? What if I was forced at gunpoint to trade it? What then?

Given that, the first thing you need to do is totally dismiss any knowledge or preconceived notions you might have about the company. Like my IBM miscues, these will cloud your judgment. Instead, just look at the chart objectively, and let it "speak" to you. (And it's saying, "Buy my Greatest Love Songs of the 70s, featuring

The Captain and Tenille


Whoops, it's saying, "Hey, I'm volatile, but essentially I'm acting like a lot of other growth stocks. I have big volume on the price rises, and I pull back on decreasing volume." In fact, this is exactly what supercharged stocks look like. Let others look down their noses at this "mania" stock. You just focus on the chart.

So, I look at the

chart and what do I see? Well, I certainly wouldn't short it. No current breakdown. No impending breakdown. Nothing. No, it looks like it's consolidating now on declining volume.

Given that, I'd put a buy stop in just above the all-time high. And if it got executed, I'd throw in a stop-loss stop just below that all-time high. Maybe it works, or maybe you get whipsawed in 30 seconds. Either way, it's the lowest risk/highest reward scenario I can think of. But again, there's nothing forcing you to tackle a monster like this. The prudent course: pass.

Mytrack, My Way

Finally, an attentive reader pointed out, and I said I'd give it a try. I have and here are my thoughts:

Yep, real-time streaming quotes for $20 per month. (Actually, a bit more, since you have to pay exchange fees.) Cheapest I've seen, though.

Still a little buggy, but not unbearably so.

Can only enter 21 symbols, so a potential negative if you have a bunch of positions.

Can customize columns, so that's a positive. Still, it's no

PC Quote

in that regard.

Can look at real-time option quotes, so that's helpful.

Includes some sort of "implied pricing" that looks at the price of your stock versus the underlying option. Neat, but I can't figure out how or why I'd use it.

Comes with Time and Sales. For a worrywart like me, a particularly valuable feature that normally costs extra bucks to get. Kudos to TRAC for throwing this in.

Neatest of all: Every time you boot it up, it defaults to the symbol TRAC on the bottom of the screen. Well, neat if you bought TRAC before it issued its full release. Many readers suggested I do exactly that, but I didn't. Shame on me: On release day, the stock was up more than 50%.

Overall, then, not a bad $20-plus package. I shouldn't even be looking at real-time quotes during the day anyway, but if you're so inclined, this isn't a bad first step. And, at least it shows everyone else that you don't have to pay a fortune to have this kind of information on your desk.

Gary B. Smith is a freelance writer who trades for his own account from his Connecticut home using technical analysis. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Charted Territory appears every Wednesday. His other column, Technician's Take, appears every Monday, and his Q&A column, TSC

Technical Forum, appears every Saturday.