In the words of reader
, "This contest is just the thing for these summer doldrums!"
Gwilym, my feelings exactly, and I was overwhelmed with excellent entries from our astute readership for my second TA/Fundy Contest II, or TF II for short. (See last Wednesday's
column for details.)
Below, you'll see the final selections, but I first want to thank everyone who was nice enough to send in a nomination. Obviously, I couldn't choose everyone, but I think the final list -- which I'll cover in this column and Friday's column -- is pretty good.
So good, in fact, that I was interested in quite a few of these myself. To be fair to all though, I will take small positions in
of these entries, based on the entry signal provided by the reader. And on that note, here are five of the top 10, with mine thrown in as a bonus. The other five I'll have on Friday.
The first entry, from
, was intriguing. I normally dismiss over-the-counter bulletin board stocks. But Scott did such a convincing job on the writeup, I felt it was worthy of an entry nomination. As a reminder, I am now long SNMM as it broke over 11 3/4.
I like Starnet Communications (SNMM) which trades on the Nasdaq bulletin board. I like it because it's a leader in the fast-growing industry of Internet gambling (a potentially $10 billion a year business by 2002). SNMM is also that rarest of entities -- a Net stock that actually has earnings! SNMM not only has its own online casino but it also licenses its software to other online casinos and takes a percentage of the amount bet. Add to this the fact that it has applied for a full Nasdaq listing, which could be approved any day now, and I think I have a winner here. TA: Technically I would buy it if it broke out of a pennant formation. Draw the top line downward from March 29 to April 19 to May 20. Draw the bottom line upward from March 23 to May 12. The breakout will come at 11 3/4. As for the sell point, just use the six-month contest end as the sell date.
Long SNMM at 11 3/4; sell on 12/7/99.
The next entry was sent in by three readers,
. Each had compelling fundamental reasons to buy the stock, but each had a different entry and exit point. Since I wanted to give all three gentleman the opportunity to play, I chose John's entry and exit method for simplification.
Knight/Trimark Group (NITE) has benefited from the growth of online investing and it continues to increase its market share. With future plans to expand into Europe and an electronic options exchange, the future seems even brighter. Spectacular year-over-year and quarter-over-quarter earnings-per-share growth. -- Eric Gerber
The fundamental reasons are obvious. This stock has an
Investor's Business Daily
earnings-per-share and relative-strength rating of 99. Its IBD accumulation/distribution rating is A. It beats every estimate every quarter by a mile and has a return on equity of over 50. -- John Ben-Ner
Went to the annual meeting and really liked the management. -- Jeff Weiser
The stock pulled back after the split and it is now again over the 50-day moving average. You can get in anywhere over 60. Use a 54 7/8 as initial protecting stop and then the 50-day MA is fine for an exit point. -- John Ben-Ner
Enter at 60 1/8 buy stop; initial sell stop is 54 7/8, with 50-day MA as trailing stop.
is the next entry, and was also submitted by more than one reader. Of course, this was a stock I profiled in a recent weekend
TSC Technical Forum, so they no doubt stole my idea! Nevertheless,
. . . Come on down!
Of course, anytime you have three folks playing, you're going to have three different money-management schemes. So, like NITE, I mixed and matched what the three came up with.
VISX is a leader in the laser vision correction marketplace. Currently VISX commands over 80% in market share and just received Federal Trade Commission relief in a dispute over some patent concerns and concerns about "monopolistic" activities. VISX earns a fee of over $250 per procedure-- each time one eye is repaired -- and also earns $$$ on machine sales. Machine sales are increasing sequentially, and procedures are increasing exponentially -- meaning lots of positive earnings-per-share surprises. -- Tom Normand
My sure thing for the stock contest is VISX. I know several people who have had the eye surgery. (How's that for fundamental analysis?) -- Mark Doshan
Growth ahead of it (>100%), and it is trading at a price-earnings ratio of 35! -- Nusair Bawla
Buy VISX on a pullback to new support at $71 which is right now! --Tom Normand
Hold the stock until it closes below the 50-day MA. -- Mark Doshan, Nusair Bawla
Long VISX at $71; sell when it closes below the 50-day MA. (Note: I am long VISX at $71.)
Unlike most of these other companies,
has an offering I've actually used. And I have to say, ordering up birthday gifts for my nephew in Florida was a lot simpler than running to
Toys R Us
, getting something wrapped and then going through the whole shipping hassle.
states his case:
I wish to enter ETYS. Strong initial public offering, and six months from now it'll be the hit of the Christmas season.
Buy on dip back to 45. Sell in six months.
Long ETYS at 45; sell on 12/7/99. (Note: I am long at $45, but reserve the right to bail out!)
This next pick I absolutely love because it shows some good, creative, out-of-the-box thinking. I'll let Gwilym Archer explain:
Here's my pick: the India Fund (IFN) - Get India Fund Inc Report. Somehow the risk of an escalating Pakistan-India war seems less than the risk of the Fed taking the market down! Seriously, India seems poised to benefit from the recovery in Asia with earnings forecast to grow at 20% this year.
(For analysis, see Christopher Wood's May 23
My actual entry point was June 1 at 8 7/8, on the gap up, confirming a measured move, and bouncing off the 100-day MA. As a trailing stop I'm using a close below the 100-day MA.
Long at 9. (Note: Gwilym noted her entry before my column ran last week. So in fairness, I noted the lowest price for IFN since the contest began. Close enough, I think.); sell on a close below the 100-day moving average. (I am long IFN at $9.)
Finally, so you didn't think I was cheating (well, not too much anyway), I wanted to get my pick up ASAP. My choice is
... on the short side. Here's my rationale:
From what I can tell, it's essentially an Internet holding company. And yeah, that's great as long as the 'Net is going up. But, what happens when it goes down? Right, you have an overpriced company with interests in a lot of other overpriced companies. Ah, but who knows what their structure is? Whatever they're doing, it ain't working, as they just came out with earnings (or lack thereof) that missed analysts' estimates by a mile. The whole situation looks grim in my simplistic view.
Okay, you're not going to believe me, but I shorted CMGI after it had broken through both its descending triangle and its 50-day moving average. However, I wanted to be ultra-safe, so I didn't short it until it rose back to the 50-day average, but failed to cross it. In keeping with the rules, I didn't enter my position until after the contest started. As for my exit, I'll cover if CMGI closes above its 50-day MA.
Short at 107 3/8; buy to cover if CMGI closes above its 50-day MA.
Okay, I think you'll agree, there are quite a few interesting possibilities. And there'll be five more on Friday. Stay tuned!
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 was long SNMM, VISX, ETYS and IFN, and short CMGI, 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