You like me! You really like me! Yeah, kind of annoying, but you know, I'm really not making these letters up. OK, yes, I do automatically delete any email that is even slightly critical of me. Oh, and it's straight to the trash bin for anyone who didn't bow down to the God of Gary. And, yes, I do pay people to send me complimentary letters.
But all that aside, the letters below do a good job of reflecting the honest views of ... all my relatives. Thanks, guys. And see you at the family reunion!
Oh, yeah, that administrative stuff: Send all email to
firstname.lastname@example.org. If it's sweet enough to give me a cavity, well, then I read it. (Nah, just kidding, I read everything you send me ... that has money attached.)
Dear Sir, I'm a beginner in the U.S. market. Made a few bucks in a couple of months then got kicked back down. Began thinking that analysts will say anything, when suddenly as a subscriber to
, I found your technical analysis. As of today, I only studied about 20 graphs and you made astonishing 100% hit predictions. Thank you very much for sharing your insight! Could you please analyze 3Com (COMS) graphs? Are they ready for a recovery? -- Antonio Piano
"Astonishing"? Nah, just my normal wizardry! (NOT!) See the attached chart to see if I keep my streak alive.
Hey Gary, I need a little help on Tyco (TYC) . What do you think? I bought in on the open Feb. 18, and the stock went straight down. I know I have to give it some time, but I'd like your opinion. -- Jonathan Bloom
Gary, Last week left me flat for the most part, A/D , high/lows too sick for me. Did go short on TWA (TWA) . I see no consolidation on this stock; it appears to me to be a series of H&S and Island Reversals. Volume on Friday's move seems weak. No doubt the move was on merger-in-the-industry speculation. Love to read your take on the chart. -- Richard Kelley
Gary, Enjoy learning from your writing. This is a congestion question. I know your strategy doesn't concern looking for rolling stocks, but could you give me your take on Lincare Holdings (LNCR) ? If it would break 34-ish on volume, wouldn't it make a short? And then if it were to turn around on volume after a few days and went above 37, could it be a long? It looks simple from the past ... or is it a trap? -- Ron L.
The Trading Range
Gary, I know that most of your trades are from breakouts of congestion, but why don't you trade the trading range? There seems to be more trading opportunity within the range. -- Brad White
Good question and simple answer: I just don't have any data on trading within a range. And if I have no data, I have nothing to fall back on. It's certainly a reasonable approach, just not for me right now.
Dear Gary, I am new to technical analysis. I use IBD's O'Neil's recommended cup-and-handle pattern to buy most of my stocks, which has been very successful. I like your column and would like to learn more about technical analysis. How would you analyze New Era of Networks (NEON) - Get Report, especially a buy point? It has a fundamentally sound balance sheet and has been rewarded for earnings. -- Keith J. Greshik
Tracking Equity Funds
Gary, Studies show that generally the price of a stock is at least 65% determined by overall market forces. My impression and observation are that technical analysis can be beneficial for tracking equity funds' trends and predicting short medium-term action. MACD, stochastic and basic charting techniques seem to work using BigCharts and ClearStation, especially when combined with monitoring market volume and advance-decline info. Any observations/comments/suggestions are appreciated. You've got the best site -- the writers are good, humble, interesting, relevant, fun and original. Special thanks to Gary Smith -- he's added a whole new dimension to my investing. -- Bob Shaffer
How could I not include such an objective, astute, unbiased letter such as this?!
In any event, yes, I think you can use TA against mutual funds to get a feel for the market. However, it's also easy to do the same TA against indices such as the NDX, and tracking "stocks" like
. In fact, see my
Feb. 24 column for a look at how the
movement related to my overall trading.
Dear Gary, I enjoy your column very much although it seems to me it's very hard to chart Internet stocks given the volatility of their share prices. I am currently long AXENT Technologies (AXNT) and wonder how you interpret the chart pattern. Do you think it will break out from its 39 top area or retreat to the support level of around 33? Also, will its inclusion in the new Dow Jones Internet Index, which commences trading Feb. 26, have any effect on the share price? Thank you for your comments. -- Ron Liebowitz
On the subject of stocks being added to an index, I've never been able to figure out what, if any, effect it has on the specific stocks. Obviously, most stocks jump upon announcement of being added to an index. But after that, it's anyone's guess.
Gary, Thanks for the quick turnaround on my last email about adding a "print entire story" button. This has been a boon to me. I hope your other readers appreciate it as well. On the issue of specific stocks, I was hoping to get your opinion of SIII (SIII) . The stock has climbed recently and currently appears to be in congestion. I am looking to enter on a move past 8 with a stop at 6.5 or thereabouts. Thanks very much indeed. Keep up the great work. -- Rahul Pathak
Gary, I am interested in your thoughts on Restoration Hardware (RSTO) . It seems to be in near the low in a trading range from 19 to 30. The past few days have shown what I see as congestion. It has slightly dropping prices with a significant drop off in volume. Your articles are my favorite part of
. -- Tom Banks
Thanks for your kind words!
Gary, I am an avid reader. I only keep my subscription now because of you. (Hint: Bring this into the Jimster Man when your "rate" needs adjusting.) On Nov. 15, 1998, you helped me take a look at an i2 Technologies (ITWO) chart, and I appreciated the input. I am now asking for input and a chart on Guilford Pharmaceuticals (GLFD) . I'm hoping the stock is traded actively enough so you could have an opinion. The out-of-favor bios aren't getting a lot of love -- a reason I'm long this baby with a good cost average. -- Mark P. McDermott
If only the "Jimster" paid me! No,
is the "final authority," so I hope he's reading this! As for Guilford Pharmaceuticals, see the chart!
Gary, First let me say you are an excellent writer and have a healthy sense of humor. I especially like your structured approach to speculation. That said, I would like your opinion on using options in place of stops, sort of like buying insurance on your stock position. If you are long a stock at 38, you place your stop at 6% or at the point that you feel the momentum has changed. If stopped out, you move on. However, if the stock goes to 40, you buy your insurance with the profit, i.e. the 40 puts, and place a stop on your stock at 38 1/4. Now you have the upside potential and the downside potential. If you get stopped out of your stock at 38 1/4, your puts would be 2 points or more in the money, which you could hold if you saw more downside. If the stock gapped down to 30, your stop would be triggered, losing you 8 points, but your put would be 10-plus points in the money. If the stock continued up, your puts would eventually be worthless and your stock would be worth more. Of course, it's the reverse for short positions. (I won't get into writing options, which you could add to the mix.) What's wrong with this strategy? Any improvements? -- Patrick J. Fernicola
This is like one of those
Marilyn vos Savant
questions ... only I don't have half her IQ!
OK, I'm sure options experts can dissect this one, and I'd welcome their input. The biggest flaw I can see is if right after purchasing the puts, the stock just sits there. That is, it stays at 40 or so until the puts expire. Then you're in a situation where you'd have had the 2 points profit, but it's negated by the 40 puts decaying to zero.
The other question: Which puts (assuming the stock even has options)? I assume the next month out, but what if you're between option expiration dates?
Still, your strategy does have some attractive features, so readers, here's your chance to help out Marilyn!
Gary B. Smith is a freelance writer who trades for his own account from his Maryland home using technical analysis. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Smith also writes Technician's Take each Monday and Charted Territory, which appears every Wednesday.