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Technology Stocks : JDS Uniphase (JDSU)

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To: Kayaker who wrote (1657)11/3/1999 8:06:00 PM
From: Guy Gordon  Read Replies (4) of 24042
 
Well, OK. But don't forget --- you asked.

Here's my chart: white-crane.com

There's lots of different forms of TA. What I do is called trendline or channel analysis. Frankly, I've never found anything other form of TA convincing. It's too easy to fool yourself. (I have a science background, and am all too aware of this human tendency.)

I like to find stocks that are moving up in a straight line (on a log chart.) Also, you must be aware of your own time frame. I'm not a day trader. I'd prefer to hold stocks for a year or so. There are trends in all time frames. I'm looking for month-long and longer trends. Note that I'm not claiming that all stocks trade within trend channels. I'm looking for stocks that do.

Looking at my JDSU chart, you can see that I've drawn a straight line under all prices from mid-Oct 1998 to the present. JDSU has bounced off this line several times. That's what makes it a support line, and defines the bottom of my channel.

Next I draw a parallel line that caps the top of the price range. This defines the resistance line of the channel. JDSU has only touched this line once, so it is not a well confirmed resistance line. This means that JDSU more often turns around before reaching this level.

How to use the channel: Having found a strongly trending stock, I try to buy just after the stock has bounced off the resistance line. I place a mental stop just below the resistance level, and if the stock falls through I sell, and am out with only a small loss.

Next, I intend to hold the stock until it finally leaves the trend channel. Each week I move my stop up to match the channel. If it falls through I sell. No excuses. No re-evaluations. That support line is my solid selling point. This provides a huge advantage. It's too tempting to fall in love with a stock, and not sell once the up-trend is done.

Third, when the stock hits the top of the channel, I expect it to either snake along the top for a while, or move sideways or down and return to the bottom. Based on how the price moves, I might sell covered calls, buy puts, or even sell the stock. I would only sell if I felt the fundamentals were changing or I had a better prospect to invest that money in.

This trendline investing has kept me long-term invested in CSCO, MSFT, and GE. I'm also currently in AMAT, CYMI, HD, and QCOM.

Any questions? :-)

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