Darrell - My position is pretty simple and clear, and has been posted here many times. The bulk of my current DELL holding has a basis under $10, so I don't think that position will ever be under water. I see DELL trading in the range it has been in - roughly 20 to 30 - until they make a convincing change in the way their business is perceived. Incremental shifts in the current business won't do it.
So I cautiously invest in DELL when it hits the lower end of that channel, and sell those trading shares when it hits the higher end of the channel. I sell calls against my base position when the stock is heading up at the high end of the channel, usually 30s but sometimes 27.5s if I'm feeling especially pessimistic.
That strategy has paid off very well over the last few years, allowing me to get a good return on my DELL investment and make something on the volatility both with options and with the trading position.
I don't advocate that anyone else follow my example. But I do think that even suggesting that DELL will rise out of that channel any time soon is overly optimistic, especially based on the notion that they are shifting to enterprise business, which is just not supported by any data.
I don't know the answer to your other question. Bashers should do the opposite - since at 25 or below, DELL is more likely to go up than down, and above 27 more likely to go down than up, they would have more credibility reversing the advice you describe.
With luck, the channel will move up in second half, maybe by 5 points or so. If that happens I will adjust my simple play accordingly. |
