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Non-Tech : Dorsey Wright & Associates. Point and Figure
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To: mph who wrote (4758)1/12/2000 12:59:00 AM
From: Ms. X  Read Replies (3) of 9427
 
I was asked about QCOM puts and whether someone should buy more after
the second day or so of the Nasdaq sell off. My response was no
because QCOM had been strong and it was holding some support. I mixed
this decision also with the indicators holding their position and in
general it looking like a pullback, not a major correction.

First of all, before you take a position in anything you have to know
not just guess but KNOW what kind of market you are dealing with.
When the Nasdaq dropped significantly some assumed that it
was "The Big One" and you know they weren't Piffers. If you KNOW the
market risk is low and that the Nasdaq is just pulling back you have
to determine if taking a short position is worth the trade. If you
know the market risk is low and QCOM will just be pulling back you
will have to be nimble and exit appropriately. With the way QCOM
moves lately you have to be damn sure of the enter and exit points and
be as quick as the stock itself. Not many have that kind of trade
skill and it isn't for the weak at heart.
Well, the market risk was low and with the short term indicators
keeping positive any positions to the short side would have to be
quick and the timing perfect. So, it was probably prudent in most
cases not to enter a short trade, stay long and BUY on the pullback
rather than trying to short or put the stock.

Here is the chart with comments.

200 -----+-X <--High on January 3rd.
198 | X O 198
196 | X O 196
194 | X O 194
192 | X O 192
190 -----+-X O -------------------190
188 | X O 188
186 | X O 186
184 X | X O 184
182 X O X O Top182
180 ---X O X O -------------------180
178 X O X O 178
176 X O X O 176
174 X O 1 O 174
172 X O X O 172
170 ---X O X O -------------------170
168 X O O 168
166 X | O 166
164 X | O 164
162 X | O X <--This move on Monday broke a double top and put
160 ---X | --O ----X O QCOM back on a buy signal.
158 X | O X O 158
156 X | O X <--reversal up on January 6th.
154 X | O X O X O 154
152 X | O X O X O 152
150 X | --O X O X O -----------150
148 X | O X O X O 148
146 X | O X O X O 146
144 X | O X O X O 144
142 X | O X O X O <--reversal down today, January 11th.
140 ---X | --O <--Low on January 5th.
138 X | O X 138
136 X | O X
134 X | O <--January 7th, double bottom break.
132 X | This move brought it close to last resistance.
130X-<--Last area of resistance (where stocks usually pull back to.)
128X O X |

With a stock that moves with this much volatility we look at the 5pt
chart as well.

200 +---------+-X -----------200
195 | | X O 195
190 | | X O 190
185 | X | 1 O 185
180 | X O X O Top180
175 -+-------X O X O ---------175
170 | X O O 170
165 | X | O
160 | X | O X
155 | X | O X X O
150 +-------X +---O X O X O The base in this area is pretty obvious.
145 | X | O X O X O Only if the stock drops to 130 does it
140 | X | O O X break major support.
135 | X | O
130 | X X Here you can see the pullback was also to last area of
resistance (before the major move up).

If someone was holding puts or shorts now it would be a precarious
position. On one had the RS did flip to O's which isn't good but all
that could mean is that QCOM stay where it is while the Dow moves
forward. QCOM has a lot of support at the 135 to 140 range. This
would be a logical place to exit any puts especially if QCOM reverses
back up. On the 5pt chart a move to 165 would be very positive.

This is what I mean by using the whole market as a guide. If the
market was in a riskier position QCOM may have made a good short
because a good portion of a stocks movement is based on the market.
QCOM had been making some large gains so it was normal for it to give
back some of those gains but it found support quickly and held.
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