If all goes well, I'm already on the pool deck watching the final day of the
Potomac Valley Age Group Championships
. Warm-ups are at 6:30 a.m., with the first event of the day at 8 a.m. Furthermore, if the girls swim well, they come back tonight for finals.
I say "if all goes well" because this week, we've had our fingers crossed. A raging flu bug is going around, and it's already knocked Katherine out of action for four days. Now, I've played golf with symptoms bordering on malaria and managed to hold up fine for four hours. Swim a 200 IM in under three minutes, though? Yeah, right.
It'd be a shame, then, if right before THE meet of the season, illness did the girls in. But it's out of our hands now, so all we can do is let fate take its course.
The link to trading: You do your homework, you prepare and you execute your trades to the best of your ability. Sometimes, you get a bad break, though, and end up with a day, a week, a month or even a year of lousy results. And what do you do? Nothing. You just suck it in and make sure you're ready to go for the next round of trading. In the end, the good and the bad balance out. At least that's what I'm hoping if BOTH girls pull up sick!
Questions? Comments? Need 100 breast splits? I'm your man. Send missives to
firstname.lastname@example.org. I can't get to them all, but I'll do my best!
A Long View of Microsoft
Gary, What are your short-term and long-term views on Microsoft (MSFT) - Get Report? Are you long Microsoft? Short? What about the impact of the antitrust case, this week's Java licensing issue vs. Sun Microsystems (SUNW) - Get Report and IBM's (IBM) - Get Report Linux decision? Is 147 a share the time to buy, which is 15% off its high of 175? I say no. I say it hits at least 20% off its high (140), maybe dips even lower, maybe WAY lower (129?), then rallies to a maximum 157 before the split (78.5). What do you think? -- Jeffrey Hildner
Let's see, you follow Microsoft a bit closely, right? So, you're probably in a better position to answer questions like Linux vs. Windows. (Although, take it from someone who fought the OS/2 vs. Windows war: Linux doesn't have a prayer.)
Also, I have no position in Microsoft, so my read of the chart is unbiased. (In fact, readers please note: If I ever do have a position in a chart displayed in this column, I will
let you know right up front.) For sake of simplicity, then, I'll look at a long-term view of Microsoft.
Misreading the Net Stocks?
Gary, I read your recent analysis of broadcast.com and noticed that the chart looks almost identical to several other Internet stocks, including Yahoo! (YHOO) , Broadcom, Mindspring (MSPG) , Amazon.com (AMZN) - Get Report, Infoseek (SEEK) , etc. Since many people are getting bullish on the group, including the recent
Internet summit, I would be very interested in a more detailed look. It seems to me that the charts look like textbook descending triangles, which imply likely breaks to the downside, possibly big breaks. This is the exact opposite of what the "experts" are saying. What's your take? Am I misreading the charts? Thanks. -- Don Ferguson
We'll see if I'm in lockstep with you. During my recent Yahoo!
chat, I also was a bit bearish on Internet stocks and on tech in general. Let's take a look at Yahoo!, in fact, and see if we can see that triangle.
Long on Level One
Hi Gary, This is my first time writing to you. I have certainly learned a great deal in just reading for the past couple of weeks. Though I am only paper-trading right now, I certainly would appreciate your opinion on Level One Communications (LEVL) - Get Report. It seems to have pulled back lately. Would you consider it a good long candidate? Thanks. -- Nusair Bawla
Gary, I'm new to TA and still learning. Thanks for your insights. I know you are not a big fan of moving averages, but do you use them to help you select an entry point on a stock as an investment? For example, it looks like Safeskin (SFSK) was a GBS Classic with a breakout from congestion on good volume Feb. 11. But there was really no follow-through, and the stock has since traded lower on declining volume. I have been looking to get into this stock as an investment, not a trade, and fortunately did not play it as a breakout. But now that it has declined to where it appears the 20-day and 40-day moving averages converge, and I assume would lend support, would this be a good entry point? Or would it be better to wait until it breaks again to a new high? -- Jonathan L.
Let me try this without charts because the real issue is the validity of moving averages, or MAs. As you point out, I'm not a big fan of them, for two reasons. One, I don't think they consistently work, and two, they're entirely subjective. As an example, let's say I looked at Safeskin and agreed a good entry point is where the 20- and 40-day MAs converged. But, on a whim, I also looked at 25- and 45-day MAs and found they did NOT converge. What, then, do I make of that conclusion? Are your numbers more valid than mine? I'm uncertain. I do know this: I can make almost any chart look good or bad depending on what MAs I use.
On the other hand, you could argue that many approaches to TA are also subjective. Looking at my method, what is "congestion"? Therefore, the bottom line becomes this: If you like MAs, then develop a methodology that uses them and that can be tested. And then don't deviate just because a chart looks bad with a 20-day MA, but good with a 21-day MA. As usual, the key is not your indicators, but your consistency in using them.
In Love or Hate with BSX
Gary, Boston Scientific (BSX) - Get Report is a large-cap and on top of its respective markets, but everyone seems to love and hate it at the same time. What does the chart king think of this action lately? Seems encouraging. Thanks in advance. -- Harry Shapiro
Nailing Down a System
Gary, Very enjoyable reading your missives. Instructive, too, especially when combined with Helene Meisler's take on whole-market situations. More questions on methods to help me nail down my own system. I'm inclined, like you, to KISS. Part of this to me means: Keep the defaults on the charts set at daily closing prices and six months. In your column last Sunday you looked at Intuit (INTU) - Get Report on a weekly and OHLC basis and the others in the same column on a daily and close basis. I also have seen you look at six- and three-month charts as well as annual. When you study a chart to apply your intuition to one that has "popped out of your system," do you flip through various timing options? Or do you have it set for one take? Please pass along to your technical guys that I think the "print this story" option is the best thing y'all have added. Thanks. -- Gary Himes
Yours is a good question. For the sake of my trading, I always look at the chart with the same parameters: daily candlesticks with about a six-month lookback.
For the Tech Forum columns, however, I'm not trading as much as teaching. Therefore, in order to clarify certain answers, I will alter the time frame and often use OHLC charts as they look less cluttered within the column.
Again, though, for your trading, it's always best to at least start with the same standard view.
Gary, I think that you've written that you only buy or short stocks over $20 because they perform better. In any case, that is part of your stock scan. I have two questions concerning that. -- Michael Graff
- Have you come to this conclusion from experience, research or from what you have read?
Do you mean perform better strictly in terms of your stock-picking method (i.e. breakout from congestion on high volume) or in terms of general performance compared to stocks over $20?
When I say stocks over $20 perform better, it is only within my own methodology, of course, and is based on their "win rate" when compared to stocks under $20.
All these results, though, are based on both back-tested data as well as hard data from my own trading. Of course, I fully understand the money management parameters I choose bias the results in favor of the higher-priced stocks. But, it's difficult to control all variables at the same time, and I had to put a stake in the ground somewhere. No doubt, I could trade stocks under $20 very well. It would just require a different set of money management parameters.
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.