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SFE 67 7/8 short term technical update. The last technical update was Aug. 13. That update indicated a goal with the stochastics used of obtaining moves of $5 to $15, over 2-6 wks. The previous signal was a $70 sell signal that took about 3 weeks to develop into a buy signal reported on Aug. 13, at $51. Some reservation was expressed about that signals validity, as at the time the long bond was trading at a yield in the 6.20s%, and the implications for SFE would be not good if the bond decline continued. The next day witnessed a dramatic drop in yield [bond rally] that paved the way for SFE to move up after a slow start. A small position was taken on that buy signal. Yesterday, Fri. was exactly 3 wks. since that buy signal and SFE has gained $16 7/8. So the gain and time elapsed were squarely within the parameters set. SFE is currently overbought. One or two flat or down days would probably produce a sell signal. The good news is that there is no signal yet. Also good news is that SFE pulled back Thu. and held its moving average. In reality, SFEs general short term [0-three wk.] direction will be determined by ICGE. If ICGE is up $10, SFE will be up, If ICGE is down $10, SFE will be down [90%+ probability of directional ST correlation est.] Determining ICGEs short term direction is difficult. Because of the limited time publicly traded, long term patterns of behavior are not available, thus making some technical tools unavailable. Normally, after the high volume move that occurred late Tue. and early Wed., and with the extent of the move, one can usually count on no lasting downside for the very short term. Going into the first part of next week, that conclusion is still effective, though as time goes by, the probability of limited short term downside lessens. The day to day movement of ICGE is now largely in the hands of short term traders, which means that valuation concerns [to which I subscribe] are probably not relevant to ICGEs short term direction, though for anyone contemplating a long term position, should be of concern. When it came public, ICGE had a roster of smart backers [Michael Dell, IBM, GE capital, Comcast, Compaq], buying at $12 or less. In the low $80s, it is a fair guess fair guess that few trades on the buy side are being conducted by these knowledgeable types. It is probably the case that todays buyer is of a whole different stripe, and the long term investing acumen of todays buyer is suspect. [of course many are not thinking long term anyway, but just a short term flip]. One can still make money from these short term momentum types pushing it higher, but if one is concerned about risk as well as reward, buying at these levels may be pushing the limits of risk vs. reward. Is there any reason why ICGE could not now be trading at a market cap of $5B instead of the current $10 B? It is well to keep in mind that it is only a matter of collective opinion that ICGE goes for $10 B. They could push it to $15 B. but as amply demonstrated by the behavior of "blue chip" AOL [which dropped 50% in a few mo.] they could just as well cut the valuation in half to $5 B with no corresponding negative development from Internet Capital Group the company. For all but the most aggressive short term traders, I view SFE as the preferred way to participate in the long term growth of not only ICGE, but a broad spectrum of internet related, cutting edge investments-especially, if one values a more comfortable risk reward situation. Getting back to SFE short term, will update the technical position upon viewing the early week trading. Disclosure: still holding a trading and long term position in SFE, and long term DSSP position in ICGE. thanks, Mike |
