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I agree with you that the only way to go for NOVL is up. The technicals are better than ever. On any upside rally the stock has been posting larger than usual volumes while, on downside retracement, the volumes were relatively small. Also, the level of support has gone up 10% since the stock hit bottom last month at 10. The next resistance, at 12, has already been tested twice, and it may hold the third time. As for fundamentals, they have been improving as the company is concentrating on its main area of strength (networking) and finally stepped into the internet where its leadership will be manifest in no time. The competition it faces from NT is a temporary fad, it is a fact of life (as old as life itself) that no one company can excell in all areas as Microsoft is trying to do. In addition, companies that are betting their future on NT are not doing that well in the market. There was a time when people bought IBM PC because nobody would blame you for doing so if you fail giving the prestige that
was associated with IBM. Well, many other companies who specialized in one aspect or another of making and selling PCs performed much better than IBM in that arena. As for people worried about the overall market after election (including the article in Barrons about one moth ago) they fail to understand the revolution in the stock market that was brought about by the internet. Commisions for trading on the internet are so low that some traders buy and sell a stock after at has moved by 1/8 or 1/4. This is bound to make old rules of technical analysis of a stock as well as the stock market absolete. Add to this the ease of obtaining timely information about the companies involved and you realise that it is a whole new world out there and as such new rules must be discovered to heolp understand what is going on, let alone what is going to happend in the stock maarket. Add to this the contrarian view that when most people are expecting the worst to happend it becomes unlikely that it will happend. Finally
for people who are concerned about the apparently high P/E of NOVL, the number is abviously misleading giving that 1996 is an odd year for the company and the common expectation is that yearly earnings will see a huge (over 200 %) jump between from 96 to 97. Most importantly, remember, if you are waiting to see the writing on the wall, it is ususally too late and the stock, by that time, would have become overpriced. Ghassan. |
