Is it an incredible world where you can buy an initial public offering like
at the open -- already up over 100% from the IPO price -- sell at the end of the day, and still make money?
I happened to be watching that action last month, and well, whew! That action is so foreign, so unbelievable to me, my jaw dropped. And then, of course, it went straight up the next day. I just want to know if
bought at the open day one, and then sold at the end of day two. If so, you have my utmost respect and admiration. You sir, or ma'am, are the Master Trader!
I, on the other hand, am the -- well, you can fill in the blanks. For now, call me Gary B., your friendly seer, who sees all, knows all. As always, I am entertaining questions right here at
Another Stroll Down Memory Lane
But first up, a historical perspective. Last week, I
asked readers who traded in the bear market of the early 1970s to share their experiences. We heard from one reader yesterday. Today, I am thrilled to share another reader's experience. We can always learn from the past.
I was in the business with the old F.I. duPont, and did trade both sides of the market then. That was the firm Ross Perot and EDS (EDS) stepped in to save. Firstly, volume in those days was in the millions and not the hundreds of millions. The Nasdaq was the pink sheets, there were no listed options exchanges. Block trades of 10,000 were infrequent, 100,000 made everyone sit up and take notice. Daytraders were little old men (mostly) who watched the tape in the front of the office and traded a few hundred shares for short-term swings, not eighths and quarters. I am, and was, in Toronto, Canada, and at least that is how I remember things. Stocks would drift down by 1/8 or 1/4 for days at a time. They would simply fall of their own weight -- no buyers -- with occasional rallies. Things still are very much the same, but also so very different. I think it was easier to pick protective targets/stops then as the trading seemed to be more "controlled" and less susceptible to violent swings. Nowadays with the TV coverage and the daytraders it is much easier to get caught on the wrong side of a big gap (this applies equally to being long if bad news breaks). If my memory serves, and I am getting older, there are a lot more gaps on daily charts than there were 15, 25, 35 years ago. Back then, if an analyst recommended a stock it would have a lesser effect and over a longer period of time, giving the trader more of an opportunity to evaluate changing circumstances. Now, one gets put out of one's misery if the wrong (or is that the right?) analyst makes a recommendation change. Trading action is not at all the same now with the Internet and online brokers; nowadays, that analyst recommendation can cause a stock trading in a downtrend to reverse and rally 10% to 20% in two days or two hours on virtually no volume. As I remember it, it took a lot more than that to move or reverse a stock's immediate trend then than now, except in very unusual circumstances. That said, I was an amateur chartist then, and still am now. But if you play trendline breaks, or negative patterns, and check weekly charts going back five to 10 years for support/resistance levels, the basic fundamentals of selecting shorts appear to be the same. Once you are in, you might have to be a little more active and agile and on top of things, as things either seem to move or are eligible to change more quickly. What I am uncertain about now is how relevant older support and resistance levels --beyond a year or two -- are. With all the increased activity and more professional money managers, levels from three to 10 years back may have less meaning nowadays. Care to comment? I still prefer to look for stocks, where once I get the break to the downside, there is some room to get some points on my side before the first support level; from there it is easier to place stops when sitting on a profit. My most important recommendation is to have a price in mind where you have to say you made a bad trade, or where things have changed from your original thoughts. I think this is a variation of a protective stop, which is a money management tool; this is about the elements of the trade itself. -- Steve Zacks
Eye on NOPT
How about NorthEast Optic Network (NOPT) ? I shorted it a while ago at 37, covered at 27. I went long on the new high breakout only to get my butt handed to me. Since the volume has been meager, what do you think? -- Scott McCray
MMM Stuck in a Muddle
NOVL a Short Play
Novell (NOVL) fundamentally looks good, doubling earnings in recent quarters. The chart looks awful to me. What do you think? -- Bud Murphey
Big Move Ahead for ARM
I bought a large position in ARM Holdings (ARMHY) July 7 at 48 1/2. It has been in a trading range from 42 to 48. I have tried to understand the different chart patterns but to no avail. Please help me to understand this chart. -- Joan Scheinberg
GTSG Not GBS' Cup of Tea
How about a read on Global TeleSystems Group (GTSG) ? GTSG was hit badly by a modest downward adjustment in earnings projections by Bear Stearns (BSC) (which reiterated its "buy" rating, and its analyst said he was surprised by the reaction to his adjustment). -- David Kaplan
Double Bottom for DIS
Swinging With INTU
DELL Another Short Play
Can you revisit the Dell (DELL) - Get Report chart? I have a feeling your opinion may have changed since your last Dell reading. Will it continue downward or is it still good times for Dell? -- Kenny Woolf
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 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