Turning Over a New Leaf

Examining US Lec, Audio Highway and AboveNet on the way to a very special week with GBS.
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If you aren't a regular GBS reader, then folks, you definitely will want to start perusing my next few columns. Why? Because it's going to be a Gar like you've never seen before! On Monday, a little bit of Papa Gar, as I solve the dilemma of what to do with your Trader Tikes. Then on Wednesday, GBS tackles the Internet. My no-holds-barred look at THE sector of the '90s and maybe ... forever. Finally, the following Monday, Gary B. actually trades the Internet. And not only that, I tell you exactly how I'm going to do it, so you can trade right along with me!!

Yes, tune in next week, for a Very Special ... Gar!!

As for right now, though, questions, and my scintillating answers. Want to join in? Then make sure you send your full name, an appropriately flattering remark and your question to

technicalforum@thestreet.com. I can't get to every question, so trust me, I'd go extra heavy on that flattery stuff!

Cupcake

Hi, Gary, US Lec (CLEC) looks like a cup-and-handle inside another cup-and-handle. I think it can rise to $25 short-term. What do you think? Josh Barnes

Left Coast

Looks like you're going to be moving to the Left Coast if your kids pursue swimming -- e.g., UCLA or Stanford. I sold at the top on feelings, but thanks to you I'm getting religion. McKesson (MCK) - Get Report is a good company, but the chart looks sick. When can I re-enter? Harry Rasmussen

Harry, they certainly couldn't do much better than Stanford. On the other hand, as long as I'm on the East Coast I'd like to keep them fairly near by. Maybe someplace like ... Duke!

As for MCK, see the attached chart.

Blue Highway

Gary: I like your column, as I am learning a lot from your comments. Could you provide your opinion on Audio Highway (AHWY) ? I do not know how to read a chart. Audio Highway came public in December at 6, though it was originally expected to be priced at 12-14. On March 31 it reported a 1998 loss of $5.9 million on revenue of $139,000. Since then it has been very volatile. Volume recently jumped from a daily average of 150,000 shares traded to a high of 8.4 million. Float is 2.2 million. Volume has been declining since the 8.4 million-share day. Could you provide your opinion on whether this will continue upward movement, come back to 13 or maintain its current level of 30? There is not much history but I would value your comments. Thanks in advance for your comments,
Amar Hiral

Voracious

Dear Gary, I'm a voracious reader and I enjoy your column more than any other I read. If you set up your own fund I'll follow!! A question and a remark: If you find a winning stock, why not let it run and raise your stops instead of cutting out with a 5% gain? The upside can be so high. Sincerely,
Marc Lerner

Marc, your question is a good one and a concept I've been asked about a number of times. My answer gets to a simple, but overlooked concept, and that's the one of "profit per day." Or in my parlance, "points per day." That is, I don't try to maximize profits on each trade, but try to maximize my points per day across all trades.

Let me give you an example: You trade SloMover.com with a trailing stop and it goes up 100 points. Unfortunately, it takes you about 100 days to get this profit (in the "old days" we'd call this a windfall; now it's an underperformer!), netting you 1 point per day.

I trade GBS.com and a variety of other stocks, on average netting about 2 points per trade. But, because I take quick profits and get out, each trade takes me only two days to close. Furthermore, I find enough fresh candidates each day that I am able to make about one trade per day.

Therefore, at the end of the 100 days, I've netted 200 points in profits, averaging 2 points per day. (In fact, this is not far from what I actually average).

Now, of course, it's never this straightforward, and especially now, where many of these Internet stocks go up 100 points in two hours! But overall, my method is trade-intensive, but with less risk (shorter holding period), and more suitable to my personality. More importantly, I find it more profitable than a buy/hold/trailing stop approach. (The current Internet mania notwithstanding.)

Coffee

I enjoy your analysis thoroughly and look forward to it every Saturday morning with my cup of coffee. Although I have benefited from the Net craze handsomely, there have been a few times that I have gotten burnt. That is when I buy a hot stock at the peak and it starts to dwindle for a while and only after I get impatient and sell them do they start picking up (such as CMGI (CMGI) , Verio (VRIO) and CNet (CNET) - Get Report). I currently have run into the same situation with AboveNet (ABOV) and Verisign (VRSN) - Get Report. Could you please help me with the decision of whether they have any prospect of breaking out again? Sincerely,
Ben Yousefi

Practical

Gary, Love your practical approach to TA. Your ideas and commentaries have made me a lot of money. I shorted United HealthCare (UNH) - Get Report on the open on Friday, April 9, based upon my reading of the chart and was stopped out during that day . Was this just one of those inexplicable losses or did I not comprehend your March 29 column about shorting correctly? David L. Rosenberg

The Bottom

Gary, I really enjoy reading your thoughts. What do you think about Apex PC (APEX) - Get Report. And maybe Dell (DELL) - Get Report? I sold at a profit Friday but I should have shorted it. Where's the bottom? Robert Williamson

Understandable

Dear Mr. Smith,

Enjoy your smart, understandable writing. I've been suffering

Medquist's

(MEDQ)

drift since the beginning of the year. Do you see anything hopeful from the chart?

Thanks,

Kenan Block

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 had no positions in the stocks mentioned, 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 also writes Technician's Take, which appears every Monday, and Charted Territory, which runs Wednesdays. While he cannot provide investment advice or recommendations, he welcomes your feedback at

gbsmith@ibm.net.