Technical Outlook

A weblog about the markets, trading and technical analysis.

Thursday, May 15, 2003 on DELL:
"The only question is whether its share price gains are outrunning its admittedly impressive performance. Based on Wednesday's close of $32.25, Dell trades at 32 times forward earnings for fiscal year 2004, which began in February." ...

"Dell has finally broken free of its two-year trading range of $23 to $30, notes Lehman's Dan Niles. 'The technicians tell us it can head higher, but fundamentally we are struggling with a valuation of over 30 times calendar 2003 earnings and sluggish IT demand.'"


What do the charts tell us? DELL broke a 4 month downtrend towards the end of February and in the last few months has gone from 26 to 32. The high of 31.06 reached in November was also broken. The stock is the highest it's been since late 2000. The question is, how much higher can DELL go? Obviously, the time to invest would have been when the downtrend was broken in Feb 03. At this price, it is riskier. The stock has accelerated its upward movement in the past two weeks, increasing the possibility of a pullback in the near term. I can only say when it might be prudent to sell which is the point at which the current short-term uptrend is broken.
A key component of trading success is to re-evaluate previous conclusions at periodic intervals. You can't be right all the time and you must not only acknowledge when a mistake has been made but also know what conditions would have to occur in order to be proved both wrong and right. When we know we have made an incorrect evaluation, we can pull out of that investment and cut our losses short.
WSJ article on the limited success of GE managers in other companies: "People who do things make mistakes. They fix them fast and move on. They never make the biggest mistake, which is doing nothing".
NYTimes article on Microsoft memo: "Under NO circumstances lose against Linux"

Analysis of MSFT:
Yesterday's close: 25.63. The one year chart shows an interesting pattern. The short term downtrend from Dec 02 to Apr 03 has been broken. There currently appears to be an ascending triangle pattern. There is a key resistance level around 26.52 - 26.725. If MSFT is able to break through that resistance level, upside to 28 or even 29 is likely. While this pattern is forming, the price should not fall below the lower boundary of the triangle. That would be a negative sign.

Wednesday, May 14, 2003

This is a blog about markets, trading and technical analysis.