Technical Outlook

2003-06-21T09:36:00.000-07:00

NYTimes- Small Investors, Once Burned, Lead New Bull: "To some professional investors, the return of the individual to the stock market is a warning sign all its own. Traditional market lore states that individual investors are not shrewd enough to know when to buy and that when they swarm into stocks professional investors often sell. But amateurs are not the only ones who are bullish. The most recent Investors Intelligence survey shows that 60.2 percent of investment newsletter writers are bullish, while 16.1 percent are negative. That is the lowest bearish reading since before the crash of Oct. 19, 1987."

2003-06-21T03:30:00.000-07:00

NYTimes- Halliburton's Rebuilding Efforts In Iraq: "The Army says KBR got the Iraqi oil-field contract without having to compete for it because, according to the Army's classified contingency plan for repairing Iraq's infrastructure, KBR was the only company with the skills, resources and security clearances to do the job on short notice. Who wrote the Army's contingency plan? KBR ... From 1997 to 2000, when Cheney was running Halliburton, two of its subsidiaries sold Saddam Hussein's government a total of $73 million in oil-field supplies. The deal didn't violate U.S. sanctions because the subsidiaries, Dresser-Rand and Ingersoll Dresser Pump Company, were foreign. KBR/Halliburton, then, has rounded the bases when it comes to Iraq. It got rich doing business with Iraq, it got rich preparing to destroy Iraq and it's now getting rich rebuilding Iraq."

HAL announced on Friday that Q2 earnings would be below estimates. HAL gapped down in Friday trading and closed down 5.2% for the day.

2003-06-21T03:21:00.000-07:00

BBCNews- Wi-fi will be 'next dot.com crash': "'What we're hearing right now are the promises of fame and fortune typical of an early deployment phase', says Keith Waryas, a wi-fi expert at IDC and warns that 'this market is still exceptionally young and rife with uncertainty.' ... George Bartley at Cordless predicts that in a wi-fi enabled UK just 15 to 20 places - like airports or train stations - will snap up 40% of all wi-fi revenue. Hotels for business travellers in about 1,500 locations will account for another 40% of revenue. About 17% of income will go to another 3,000 sites, while at the bottom end some 30,000 hotspot owners will fight for the remaining 3% of the wi-fi profit cake."

2003-06-18T21:07:00.000-07:00

Play Money: "By the time the IRS comes calling next year, April 15, I will be able to report that selling UO [Ultima Online] goods is my primary source of income, and that I earn more from it, on a monthly basis, than I have ever earned as a professional writer."

2003-06-18T20:18:00.000-07:00

NYTimes- Brain Experts Now Follow The Money: "Many neuroscientists are beginning to argue that it is time to create a new field of study, called neuroeconomics. These researchers are busy scanning the brains of people as they make economic decisions, barter, compete, cooperate, defect, punish, engage in auctions, gamble and calculate their next economic moves. Based on their understanding of how fluctuations in neurons and brain chemicals drive those behaviors, the neuroscientists are expressing their findings in differential equations and other mathematical language beloved by economists"

Interesting. Neuroeconomics, behavioral finance and technical analysis have different names but they all seem to be ways of getting behind the psychology of the markets.

2003-06-18T20:09:00.000-07:00

AP- NASD Says Instant Messages Must Be Saved: "The National Association of Securities Dealers Wednesday told its member firms they must save instant messages for at least three years ... On Monday, the New York Stock Exchange officially told its 336 member firms that instant messages must be saved."
(via Boing Boing)

2003-06-15T21:15:00.000-07:00

Someone's been bidding up my Blogshares stock. The price went from $1.01 on Jun 14 to $192.55 today.

2003-06-15T20:58:00.000-07:00

ESPN- CART may be privatized: "The For Sale sign is expected to be officially displayed by Championship Auto Racing Teams on Monday ... Since taking over CART's management before the 2002 season, CART CEO Chris Pook has maintained his goals were to take CART private and stabilize the company. 'All I can say is that there will be a press release issued in the near future,' Pook said on Sunday morning. 'Some of the naysayers may put a negative spin on it but it's the first step of what will be good news for this company.'"

CART (stock symbol MPH) has been on an constant downward trend since 1999, going from 30+ to Friday's close at 2.91.

2003-06-15T00:29:00.000-07:00

WashPost- Wal-Mart Follows The Netflix Model: "[Netflix] has more than 1 million subscribers, offers 15,000 titles and ships from 20 distribution centers. Wal-Mart has released no subscriber tallies but is believed to have well under 50,000 ... It's worth noting that Wal-Mart, even with its vast network of stores, has rejected the in-store movie rental model being offered by Blockbuster."

In response perhaps to this news, NFLX dropped 12.4% on Friday to close at 19.20. NFLX had rocketed from 4.85 on Oct 10, '02 to a high of 26.35 on Jun 6, '03. The chart now shows a potential double-top pattern but was there any reason to exit the stock before Friday? Depending on how steeply we draw the uptrend line, it was broken either May 19, 03 or Jun 9, '03. In either case, breaking the trendline would have been a sign to sell. Doing so would have meant getting out around 23 or 22, preserving an extra 15-20%. Other than the trendline breaking, another bad sign was failing to hold the breakthrough of the 26 level on Jun 6. All these would be signs to exit before the massive drop on Friday.

Having said that, as noted in the WashPost article above, Netflix has over 1 million subscribers. It will conceivably still be a while before Wal-Mart is able to catch up to them. Also, one should consider the profiles of the customers who use Netflix vs Wal-Mart. My guess is Wal-Mart customers tend to be slightly lower income and less technologically inclined. These customers are probably less likely to own DVD players or access the internet on a regular basis. However, Wal-Mart could start a price war and thus attract customers that way and drive down Netflix's profits. Still, there remains no good news on the horizon for NFLX which could spur further upward price movement other than a minor correction of Friday's reaction.

2003-06-11T00:46:00.000-07:00

NYTimes- JetBlue Buying 100 Regional Jets: "The order was an unexpected move by JetBlue, the low-cost carrier based in Queens, because the company had always espoused the efficiencies of operating only one type of plane, the A320 from Airbus ... 'It'll all depend on how it's implemented,' said Robert W. Mann, an airline consultant in Port Washington, N.Y. He pointed out that some low-cost carriers, like People's Express, grew too rapidly and failed."

JBLU closed on Tuesday at 32.978, down 4.72%. JBLU had been on a tear since mid-March, jumping 61% from 23.15 to 37.34 last week. The biggest problem with yesterday's drop from a technical standpoint is that it broke the 3 month uptrend line. Not only did it break the line, it gapped and did so on high volume.

When I see a drop of this magnitude, it looks like an overreaction to the unexpected news. The overreaction will likely lead to a minor upward correction tomorrow or over the next few days. However, as a technical trader, discipline is important. While psychologically, one may want to hold on and see, if one was trading based on short-term trendlines, it would be prudent to sell because the line has now been broken. Some profit may be left on the table but by selling, you preserve what you have, prevent further loss and there is nothing stopping you from re-entering the market if the uptrend resumes.

2003-06-10T22:46:00.000-07:00

LATimes- Microsoft, Yahoo, AOL and others plan music services: "The possible foray by major Internet players into online music downloads is testimony to the vision of Apple chief Steve Jobs, who debuted his music service April 28. But it also signals that the Cupertino, Calif.-based computer company's early lead may be short-lived ... Some Internet executives wonder whether Apple's iTunes store generates more profits by promoting the company's computers and portable music players than by selling songs."

It's hardly surprising that other companies are scrambling to copy Apple's model again. However, as with past events, Apple is at risk of innovating but having others reap the profits through their own versions. All of Apple's products (save the iPod) are tied to Apple's hardware and operating system. At this point, iTMS software is available on Macs only although a Windows version is in the works.

Releasing things on Macs only or Macs first is a good strategy if you want to attract people to your computing platform. However, AAPL needs to decide whether iTMS will be a potentially bigger business platform-free or whether it's worth more as a draw for people to buy Macs.

If AAPL is able to move quickly enough, the iTunes Music Store concept has the potential to break free of that and become something that is licensed by other parties. Imagine iTMS being the backbone for Amazon's own store or for AOL. Why would either of those companies want to team up rather than build their own? AAPL has figured it out already. They have the infrastructure set up. They can cut months out from their own development time, an important consideration especially since Microsoft is planning to develop their own music store as well. However, a question remains in whether or not AAPL's agreement with record labels allows them to sub-license their system.

2003-06-10T10:36:00.000-07:00

Canadian insurer Manulife Financial Corp has been on an uptrend since the beginning of this year. Currently trading at 28.17. A crucial test will be the 30 level, reached in May '02. At that time, the resistance was high. MFC attempted to go past 30 a few times, failed and eventually fell to 18. If MFC fails to break through 30 this time, it will be a bad sign in terms of the uptrend. If it does break through, it will be interesting where it goes from there. The historic high for MFC is 32.188, a price reached on Dec 29, '00.

2003-06-10T07:28:00.000-07:00

NYTimes has an article on how Steinway pianos are made by master craftsmen today. Steinway & Sons' is owned by the public company Steinway Musical Instruments.

LVB (the symbol stands for Ludwig van Beethoven) has gone up about 25% in the past two weeks. The one year downtrend has been broken. The next major test will be the high of 19.19 reached on Nov 4, '02.

2003-06-10T04:34:00.000-07:00

There's a good daily column in the Washington Post called Filter which focuses on a certain topic each day and links to a bunch of articles in different papers about that topic. The latest article is on Oracle's hostile bid for PeopleSoft.

2003-06-04T19:24:00.000-07:00

From MTV News- Apple looks to sign independent labels to iTunes Music Store: "Apple has invited hundreds of indie label representatives to a private presentation on Thursday at the computer giant's Cupertino, California, campus to discuss hopping onboard and adding their content to the more than 200,000 songs already available through the service."

This is good news but the contribution to the bottom line will probably be minimal. Practically all the "popular" artists are signed to the major labels. While undoubtedly bands on indie labels have their fans, they remain a niche audience. After signing the indie labels, Apple could look to foreign expansion. Perhaps set up a Spanish or Chinese or Japanese music store. They could also go the route of mp3.com and allow anyone to publish and sell music through their system. However, as mp3.com has shown, people remain interested mainly in the big name artists.

On another note, The Register reports that Amazon is interested in licensing the iTunes Music Store. The most interesting tidbit of information from that article is that Apple currently pays 65 cents of the 99 cent song price to record companies.

2003-06-04T19:15:00.000-07:00

More on Disney: DIS closed Wednesday at 20.73, +4.91% on the day. DIS has now broken above the high of 20.24 reached on Dec 02, '02. DIS is now at an 11 month high.

TheStreet.com reports that analysts are split on the prospects of DIS: "Fulcrum analyst Richard Greenfield initiated coverage of Disney with a sell rating and $16 price target, saying the shares are overvalued after the fast success of the U.S-led war in Iraq. Going forward, the analyst said he believes margins will decline to 12% from 14.3%, and that full-year earnings will only grow 9%, compared with expectations of 25% to 35% ... Meanwhile, Credit Suisse analyst William Drewry couldn't have disagreed more, saying Disney will have 'the best-performing stock in the media/entertainment group over the next 12 months.' He raised his target price to $27 from $23, based on his estimate of the company's 2003 earnings before interest, taxes, depreciation and amortization of $3.8 billion."

2003-06-03T20:44:00.000-07:00

NYTimes- Martha Stewart Expecting Federal Indictment on Criminal Charges: "Martha Stewart, who has been under investigation by the Justice Department for more than a year for her sale of shares in ImClone Systems in late 2001, is expected to be indicted on criminal charges 'in the near future,' her company said today. An indictment could come as early as this week."

MSO dropped 15% to 9.52 on heavy volume on Tuesday. Overreaction or buying opportunity? The P/E ratio is listed at a staggering 112. Is that accurate? Common sense and a look at the chart would indicate that it would be more prudent to sell or wait for more information at this point. Upon the actual indictment, MSO is likely to drop again and upon a conviction (if indeed she is found guilty), there is liable to be yet another drop, especially if jail time is required.

2003-06-02T18:28:00.000-07:00

Whoa. "Keanu Reeves has shown his generosity by giving away £50 million of his earnings from the Matrix sequels. The 38-year-old decided to hand over the money to the unsung heroes of the sci-fi blockbusters - the costume and special effects teams ... His gift to the Matrix series' 29 behind-the-scenes whiz-kids will see each of them receiving £1.75 million." From Hello Magazine via boingboing.net.

2003-06-02T18:12:00.000-07:00

More on Disney: DIS closed at 20.07 on Monday, up 2.14% on the day. The one day chart shows that for today at least, there was a clear level of support at the 20 level. As I wrote on May 31, the 20 level is big. Next to watch is breaking above 20.24, the high reached on Dec 02, '02. Next major test would be at the $25 mark.

Roger Ebert gives "Finding Nemo" 4 stars (out of 4). Of all the movie critics out there, Ebert writes the best reviews but I tend not to read his reviews until after I've seen the movie as they often contain spoilers.

"Finding Nemo" was no. 1 at the box office this weekend with 70.6 million. "The Matrix Reloaded" was 4th with a "paltry" $15 million: "The blockbuster debut of 'Finding Nemo' is even more impressive considering many tickets sales for the family-themed movie were discounted for children or matinee shows ... The $70 million represents a lot more tickets for that G-rated film than for an R-rated film, where all the tickets reflect an adult admission price."

2003-06-02T07:48:00.000-07:00

10:22am ET- DIS 20.00 +1.78%

2003-06-02T05:46:00.000-07:00

Just checked out the Bloomberg US financial news page on their site. They redid the site with a lot of Flash navigation. The look is cleaner and simpler. However, the annoying animated ads now stand out. Perhaps that's exactly what they want. The site seems rather sparse on content compared to before the redesign. The page I pointed to had only 5 financial news stories! Somebody there is definitely asleep at the wheel.

2003-06-01T08:21:00.000-07:00

LATimes- Halliburton Going Strong Amid Clamor: "The world's second-largest oil services company, Hallliburton was the No. 6 performer on the S&P 500 last year, and its shares this year have risen 24% on the New York Stock Exchange, closing Friday at $23.87, not far from its 52-week high of $24.67."

HAL has been on an uptrend since July 02. If you draw the uptrend line under the lows reached on Jul/23/02 and Oct/9/02, HAL has remained above the line apart from two brief dips below in April. HAL has also recovered completely from the huge one day drop on Dec/07/01 when it went from 20.84 to 10.94. The next test for HAL would probably be around the 28-29 level. If one were to buy now, the selling point and an indication of trend reversal would be the breaking of the uptrend line. Given the two recent brief dips in April one might want to delay selling until the stock goes below the trendline for two or more consecutive days. From a business point of view, why wouldn't HAL go up in price? The executive branch of government is friendly to their interests and a newly "liberated" Iraq provides many contract opportunities.

2003-06-01T08:08:00.000-07:00

LATimes- Broad Rally Gives Wall St. New Hope: "Pado is a Wall Street 'technician' — someone who studies the action of the market itself, such as share price trends and trading volume, to look for clues about the next big move. Many chart-watchers, he said, are focused on the 9,000 mark for the Dow, which would be a 1.7% rise from Friday's closing level. The Dow has neared that level three times since July, only to fall back each time."

2003-06-01T03:37:00.000-07:00

WashPost- Traits of Happy Stocks: "All happy stocks are pretty much alike, while unhappy stocks lose their value for all sorts of reasons ... What do happy stocks have in common? Moats. ... A moat keeps the enemy at bay. It can be a great brand name or a special way of doing business or a series of patents. In short, a moat is an attractive profit-making asset that other businesses can't easily copy ... One way to tell whether a company has a moat is to look at its profit margins compared with those of its competitors. "

An interesting but flawed article. One example cited of a company with a "moat" is Coca-Cola and yet the author admits that lately, its stock has been "a dud". So, if it's a "happy stock" and it has a moat and yet it is not performing, isn't his theory incorrect? The author believes in buying companies based solely on whether or not they are good companies:

"When you buy a stock, you become a partner in a business. It's the business that counts, not the numbers you see every day in the stock pages, not the lines on analysts' charts. Your task is to find good businesses at good prices."

We do not need to rely solely either on fundamental or technical analysis. We can combine the best of both methods. We can use fundamental analysis to identify good companies, companies in good businesses "worth" investing in. Once we have identified a good business, how do we determine what is a good price? Technical analysis can help. By analyzing the price trend, we can determine what the trend is and this what is the most opportune time to buy or sell.

Even for an example such as Coca Cola, we could keep a watch and invest only when the charts show us that it is headed in a positive direction. In fact, a look at the chart of KO indicates that now might be a very opportune time to buy! The 9 month downtrend of KO was broken earlier this month. In fact, a breakaway gap (attributed to a Morgan Stanley analyst upgrading his rating) occured on high volume on May 7 to start the uptrend. A very bullish sign. Breakaway gaps usually indicate a significant move ahead so now would definitely be a good time to invest. KO last closed at 45.57, +2.13% on the day.

2003-05-30T23:25:00.000-07:00

NYTimes: "Schering-Plough Corporation said yesterday that it could soon be indicted in a federal investigation into its prescription drug marketing practices, and face charges that employees destroyed documents related to the case."

SGP closed on Friday at 18.45, down 2.38%.

2003-05-30T19:57:00.000-07:00

BBC- Disney uses night-vision goggles to combat film taping: "Security guards use the metal detectors to try to find digital cameras, and then monitor the audience with the night-goggles for 25-minute shifts, to see if there are any strong lights coming from a video recorder ... Studios are very keen to prevent copies of their films hitting the black market, denting box office takings."

Looking at the chart, the 3 year decline of DIS from 43.875 to 13.48 was halted in March 03. The stock has rallied from 14.84 on March 12 to Friday's close of 19.65. A crucial price point is the 20 level. DIS was last at that level on Dec 02, '02, when it hit a high of 20.24. If DIS is able to break through and remain above 20, the next major test would be at the $25 mark.

2003-05-30T00:42:00.000-07:00

MSNBC- Microsoft Settles Browser Suit With AOL- "Microsoft will pay AOL Time Warner $750 million to end a private antitrust lawsuit over Web browser technology."

MSFT has been in a downtrend since Dec 02. If we draw the downtrend line based on the peaks of Dec 2 '02 (29.48) and Jan 15 '03 (28.66), MSFT remains within that downtrend. However, if we draw a steeper downtrend line based only on the peaks of 1/15, 3/21 and 4/3, then the downtrend was broken briefly earlier this month but it has since returned below that line. We may currently be in a trading range with support around the 23.9 - 24.0 range. The critical test at this point is whether or not MSFT can remain above the 24 level.

AOL is more clear-cut. After hitting a low of 9.9 on 2/13/03, AOL has been on a steady uptrend, rising to close at 14.85 yesterday, up 50% from the low. There is no technical data to indicate a reversal of trend at this point but a key level of resistance would be the high of 15.65 reached 1/15/03. If AOL is able to push past this point, the next level would be around 16-17.

2003-05-28T21:28:00.000-07:00

HK Standard- Bank of China (HK) gets new chief: "Liu Jinbao, the vice-chairman and chief executive of Bank of China (Hong Kong), has been replaced by He Guangbei in the first major reshuffle at the bank since its mainboard listing in July. Liu has been transferred to the bank's Beijing headquarters."

"According to previous media reports, the lender is looking to raise as much as 115.7 billion yuan (HK$109.02 billion) by selling 10 per cent of its assets to investors in a Shanghai listing during the first half of 2005 and 15 per cent of itself in Hong Kong in 2006. The Hong Kong unit sold HK$19.2 billion worth of shares in its initial public offering."

2003-05-27T18:21:00.000-07:00

BBC- Digital Delight for Adobe: "The price of Adobe's shares on the US Nasdaq market has almost doubled in the last nine months ... This is a rare feat given that so many other technology firms have seen their share prices crash as the gloss comes off all things digital."

The chart shows that it's been on a short-term downtrend since hitting a peak of 38.38 on May 5. Even with Tuesday's close at 35.35, up 2.08% on the day, the downtrend line remains unbroken. Unless ADBE breaks above that downtrend line (currently around $36), this would not be a buy.

2003-05-27T02:07:00.000-07:00

Marvell Technology Group jumped 16% to 32.10 on Friday. The reason given was that they "posted strong quarterly results". Was there any technical reason to invest in this stock prior to the jump? A look at the chart shows that an uptrend had been developing for the past month or two. More crucial was that MRVL had been in a trading range for the past 9 months and in mid-April had broken through the upper resistance level of $24-25. That would have been a good time to buy. Although if you had bought on April 24, you might have been frightened by the drop on April 25 from a previous close of 24.49 to close at 22.35. However, a logical stop-loss point might have been $20 and setting it at such a point would thus have kept you in the trade. Alternatively, waiting until $25 (the high achieved Nov 21 '02) to buy would have been safer. In any case, technical analysis would have tagged MRVL as a possible buy.

2003-05-26T23:06:00.000-07:00

AAPL and online music: On April 28, 2003, Apple launched their iTunes Music Store to sell music online. This coincided with a 30% jump in the stock price over a day or two. AAPL last traded at 18.32. Was there any reason to buy the stock before the sudden jump? A look at the one year chart would say no. AAPL had been in a trading range since August 02. There was no real sign of positive change. If anything, there were signs to sell. In the days leading up to the announcement, AAPL dropped below 14 on high volume. Technical analysis of AAPL would not have alerted us to this trade until the move had already begun and due to the rapidity of the rise, by the time we acted on it, it might have been too late.

This is an example where knowledge of actual events would have been of tremendous benefit. There was advance notice on April 21 that AAPL would make an announcement on April 28. Knowing that the announcement would be positive ("music to your ears"), a more speculative trader could have bought at this point. The stock didn't actually leap until May 5th and 6th, coinciding with AAPL's press release on May 5 stating that they had sold over one million songs in their first week. Acting on any or all of this information would have provided quite a handsome profit.

This also shows the importance of news, announcements and hype in causing prices to move, especially that of AAPL. I remember reading something a while ago about how AAPL's price was related to major announcements and conferences. Given what we have learned, now that the news about the music store is out, what major news is out there to spur the stock price to greater heights? The current level of resistance appears to be around 19.

One has to admire the vision and marketing job done by Steve Jobs and Apple. Jobs is always announcing something new at AAPL. It's always something done with great anticipation and fanfare, whether it's the iMac, iPod, iBook, iTunes, etc. What other tech company has done that? Microsoft? Dell? Intel? Gateway?

I kept thinking to myself: why didn't Amazon act on this idea? They have the infrastructure, the know-how. Why didn't they come up with this on the scale that Apple has? Perhaps they tried but failed. If so, why? Now that Apple has done it, is Amazon considering either partnering with them or doing something similar or acquiring a smaller online music player?

2003-05-26T18:28:00.000-07:00

TheStreet.com- Everything You Need to Know About the 200-Day Moving Average. A pretty basic article that analyzes the profitability of trading using 200-Day MA crossovers as buy and sell signals.

"If you put a $10,000 put into this system in 1950, it would be worth $55,000 today. If you put a $10,000 put into a buy-and-hold strategy, however, it would be worth $494,000."

Fails to consider refinements of the crossover strategy. What about only generating signals only if the price crosses a certain percentage beyond the 200-day MA or stays beyond the MA for a certain number of days? This would eliminate a large number of whipsaws. Also, what about studying to see if the 200-day MA is the best signal for the S&P (what the author of the article was studying). How is its effectiveness compared to using a 50-day MA or a 300-day MA? What about utilizing a double or triple MA crossover system?

2003-05-22T15:15:00.000-07:00

TheStreet.com- Merrill slaps a rare sell on CheckFree. CKFR closed at 24.15 today, -2.09 or 7.96%. Were there any warning signs? CKFR had just shown a double top pattern with the decline occuring on high volume. Traders at the very latest could have gotten out on the 19th or 20th when the price was between 28.8 and 24.25. More astute traders may have exited on May 7 or 8, when the month-long uptrend was broken and CKFR entered a trading range.

2003-05-22T14:54:00.000-07:00

McDonald's CEO promises turnaround: "McDonald's Chief Executive Jim Cantalupo on Thursday addressed shareholder concerns ranging from mad cow disease and dirty bathrooms to the taste of its coffee, promising that the company can reverse flagging worldwide sales and lift its battered stock price."

Why doesn't McDonald's sell better coffee? Imagine McDonald's partnering with Starbucks to sell their coffee in all their stores. It could attract customers to their stores and provide them with a product that produces high profit margins. Even if they don't partner with a proven coffee brand, they could consider adding lattes, mochas and cappucinos to their menu. Overhaul the cleanliness and atmosphere of their stores and they could even turn McDonalds into a destination, a place where people can go to hang out, study, etc.

As for the stock performance, MCD has risen 44% since March, going from a low of 12.12 to today's close of 17.50. Although this broke the short term downtrend, the chart shows that MCD is in a long term downtrend since 1999-2000, This is still in place. Another worring sign was the drop on May 20 from 18.16 to 16.95, breaking the short term uptrend line on high volume. This drop was attributed to the discovery of mad cow disease in one Canadian cow. Current price remains below the uptrend line. Caution should be exercised at this point and should not buy unless MCD returns above the uptrend line and maintains the pace.

2003-05-22T14:02:00.000-07:00

GIllette broke through 33 today. Stayed above 33 all day after testing support twice. Closed at 33.11.

2003-05-22T01:41:00.000-07:00

Nike signs LeBron James to a seven year $90 million shoe deal: "Rick Burton, executive director of the Warsaw School of Sports Marketing at the University of Oregon, said watching how Nike shareholders respond to the news on Thursday should be interesting."

"'When Tiger Woods signed his first deal with Nike worth a reported $40 million, one analyst said that Nike overpaid and downgraded the stock,' Burton said. 'A couple weeks later, when Tiger won the Masters, it was concluded that they had bought the right guy. We'll obviously have to wait until October to see the first glimpse of LeBron.'"

2003-05-21T21:20:00.000-07:00

What's going on with Gillette? One of Warren Buffett's favorite companies and featured as one of the "Good to Great" companies in Jim Collins' book, G has had mediocre stock performance in the past 4 to 5 years. The 20 year uptrend was broken in 1998 and since 2000, G has been in a trading range. Since August 2002, G has had an upper trading range limit of 32.49. G broke through the range on May 15, but not on significantly higher volume. Still, for the past week, it has managed to stay above that level. A sustained breakthrough above the 33 level would be a further positive sign. However, what is the further upside? I don't know but I do know that returning below the level of 32.49 would be a negative sign for further short-term gains.

2003-05-21T19:53:00.001-07:00

Atari shares sink after release of Matrix game: "After the April 17 announcement that the $30-million game had been completed, shares in Atari, formerly known as Infogrames Inc., went on a run, gaining about 200 percent through May 14, the day before the game's launch ... But since May 14 the stock has been sliding, losing almost 28 percent, although it is still up 168 percent in 2003."

ATAR closed at 4.15 today, down 0.50 or 10.75%. The chart shows a short term double-top pattern with a bad sign that the highest volume was recorded on the decline from the last top. Definite short-term sell signal.

Why the massive run-up in the last month? Why the reaction after the release of the game? The 200 percent run-up might be attributed to the hype surrounding the release of "Matrix Reloaded" but what about the rapid decline of the stock price? Perhaps the negative reviews surrounding the game and no further news to spur further buying. Also trading at a P/E of 46.50 at the moment. Here's an example where knowledge of the events surrounding a company might have helped predict a peak. It would be interesting to investigate the correlation between stock price and the release of a film by a major movie studio.

2003-05-15T10:13:00.000-07:00

TheStreet.com 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.

2003-05-15T09:52:00.000-07:00

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.

2003-05-15T09:45:00.000-07:00

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".

2003-05-15T08:35:00.000-07:00

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.

2003-05-14T16:00:00.000-07:00

Dow 8647.82, Nasdaq 1534.90, S&P 939.28

2003-05-14T15:41:00.000-07:00

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