Wit's at a Premium, but Charts Are Not

Gary takes questions on candlesticks, trendlines and more.
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It's 11:22 a.m. on Friday, and I'm sitting here trying to think of something witty or interesting to start this column off. So, let's see: choppy market? Nah, I covered that ad nauseam. Kids' swimming? Nope, they're on break now. My golf game? Boy, that'd be stretching it. Stick to your methodology? BORING!

Uh oh, I never get writer's block, but maybe worse ... maybe I've run out of things to talk about! (Yes, I am well aware that for many of you, this would be a gift from the gods!!)

In any event, my well is dry, but thankfully, you guys brought the water. (I know, I still maintain my metaphorical genius!!) Have questions for next week? Send them to

technicalforum@thestreet.com. This thirsty guy needs all the help he can get!

Candlesticks

Welcome to Maryland. Hope you enjoy the restaurants in Bethesda. I appreciate your simple approach to tech analysis. I notice that in some of your Tech Forum articles, you display candlesticks. What do you consider to be useful candlestick patterns? How about establishing an archive of useful chart patterns on TheStreet.com? Kai Der

Kai, I am greatly enjoying the wealth of restaurants in the D.C. area, so thanks!

Regarding candlesticks, that's not a topic I've explored thoroughly for one reason: I don't trust any of the so-called patterns. Yes, there are hanging mans, hammers, chisels, etc., etc. And I really used to think they meant something. But after trying to find some discernible patterns, I finally came to the conclusion that there was nothing reliable there. So, my take? I love to look at the various candlestick patterns, but basing any kind of trade on them isn't a good use of time.

Trends in Trendlines

Keep up the good work on your articles and Yahoo chats! Have you ever studied the use of trend lines in short-term trading? It seems that there are two good strategies here: 1) trade on movement up the trendline (recent examples RCNC and WWCA) and 2) trade on a break of the trendline. I would greatly appreciate and value your opinion of these techniques. Eric Schade

Eric, Wesson and I did trade quite a bit using "trendline breaks." This is detailed in a 7/20/98

column. However, we came to the conclusion that while effective, it produced results inferior to our current approach. As we only have so much capital to go around, we gave it the heave-ho.

Of course, this all pertains to the long side. On the short side, a trendline break from an upsloping trendline is a critical part of our strategy.

Where's CNet Going?

I have been enjoying reading every piece of your analysis since I am a member of TSC. Thank you for your great work. Can you please enlighten me on CNet (CNET) - Get Report? I have my position around 96. Phillip Wang

Double Bottom?

I have been long Seagate (SEG) for over a year and would like to confirm if I should add to my position here at 27 1/2 or not. It looks like a double bottom to me at 27 but I am not sure. Hemang Parekh

In a Buying Phase?

Do you think Uniphase (UNPH) is a good buy now? Paul F.

Big Board vs. Nasdaq

Do you trade NYSE or Nasdaq stocks more frequently? While day or short-term trading, I concentrated on NYSE stocks initially, but am moving to Nasdaq for a number of reasons: more Internet plays, more daily volatility for short-term trading opportunities, and apparently less specialist short-term manipulation. What are your thoughts? Greg G.

Greg, that's an interesting question, and something I visit frequently. Currently, I have no bias toward any specific exchange, but would guess that 60% of my trades are NYSE stocks. In general, there's more liquidity there, and as a result, I get less slippage on my entry and exit.

However, for many of the reasons you point out, the Nasdaq is certainly an attractive place to trade, and for day traders especially, indispensable. However, regarding "manipulation," my gut tells me this goes on more with the OTC stocks, although I have no proof of that one way or the other.

Dipping and Not Dropping

I am considering buying some KLIC on a strong recommendation from a friend. I don't like this kind of chart, since I hate to bottom-fish; however, my friend might be right and it is only a dip. Can the chart tell you if KLIC is just dipping and not dropping? Dan Fisher

The Century Barrier

I have some Intuit (INTU) - Get Report stock. It seems to be having trouble breaking through 100. Is this normal after such a run-up? Brant Carter

Brant, this is another interesting topic: I have yet to see a stock

not

struggle with whole numbers, and particularly large whole numbers. It's for that reason that if I have a choice, I always place a limit target at 99 15/16 vs. 100 1/16.

Similarly, when a stock is dropping, it often finds support at whole numbers and many times half numbers (i.e. 43 1/2).

As you probably know, though, INTU recently did break 100. It was at that point that GBS himself went long!

Wondering About 3Com

I am wondering about your opinion on 3Com (COMS) . This stock concerns me a great deal. I thought the support level was around 24, but since I am a novice when it involves charts, I thought I'd better send you an email. Scott Geiger

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.