<< If you were long then, you would have been wise to follow up with a tight trendline and have been taken out at about 10. Forget the last 5 points.>>
Funny you should mention that Ed, because my cousin ... a brokerage VP ....did just that. Though no technical analyst myself at all, I could not help but notice that, during AXC's remarkable spring run, the volume on down days ALWAYS was less than the average volume. Until one fateful day at around 14. And from there it was down to below 5.
Then Bramson's purchase the next October signalled a likely impending KM agreement - run back to 10 - then as a Christmas present the agreement with Maxtor was signed ( longs felt our patience was at last justified) But the market fired one of its numerous warning shots - The announcement of the deal was met with a quick surge then a yawn.
Then DST growth stalled ....MR yields improved ... the positive litigation verdict was overturned ...everything kept shrinking ...til that fateful day AXC announced KM research was being curtailed.
And here we are. But not alone in terms of declines in the last portion of this year ( as Randy has mentioned). An article from today's Washington Post....
<<Wall Street Gives Hot Tech Stocks the Cold Shoulder
By Jerry Knight
Washington Post Staff Writer
Monday, August 24, 1998; Page F07
Washington's hottest high-technology industries are being hammered the hardest by the retreating stock market, which is methodically marking down the stocks of the biotechnology, telecommunications, software and Internet companies that only a few months ago were the darlings of Washington investors.
Stocks of companies in those hot high-tech industries have fallen by 40 percent or more from their high points during the past year, which for all but a handful of stocks also were all-time highs. The region's traditional technology companies, in aerospace and computer systems, have fallen, albeit by less.
An industry-by-industry comparison leaves little doubt that the tech stock boom that has fueled the growth of the Washington economy for the past three years has been replaced by a full-blown bear market.
It's not that tech stocks became a speculative bubble that burst -- there have been only a handful of bankruptcies and most of the region's high tech companies are continuing to grow, indeed to prosper.
A better analogy would be a bungee cord. Tech stock prices stretched to their limits and now they've snapped back.
Flip through stock-price charts for high-tech companies and a ruthless symmetry emerges: The higher a stock went, the harder it has fallen. A second pattern also is pervasive: The higher the technology, the harder the fall.
There are just enough exceptions to validate that general rule, but in this market the "exceptions" are not stocks that still are going up, they are stocks that are gliding down gracefully amid all those stocks plunging without a parachute.
Plunging without a parachute certainly describes the stock of Ciena Corp., the Linthicum, Md., maker of telecommunications gear that is the latest example of the higher-they-fly, harder-they-fall phenomena.
The already-depressed shares of Ciena crashed to new low of $31.25 Friday from $56.78 1/8 after AT&T Corp. announced that it has decided not to use Ciena's hardware. In early June Ciena's stock soared to $88 a share after the company got a $7 billion takeover offer from Tellabs Inc. It was a darling not only of investors who liked the company's technology, but also of star chasers who liked the company simply because its stock was hot. Ciena then announced it would earn only half the profit that analysts had projected this quarter, and the affair was over.
Ciena's fall shows how speculation in hot stocks helped create the bungee-cord effect. The stock attracted traders whose strategy is to buy a stock when it is moving up and dump it at the first sign of weakness. The hot money pushed Ciena and many other tech stocks higher than rational securities analysis would justify. And when the hot money was cut off, Ciena didn't simply stall out, it went into a tailspin.
Ciena's flameout compounds the downtrend in the market. It's a safe bet that even if Ciena hadn't stumbled, its stock still would have pulled back significantly because the telecommunications industry as a whole is in retreat.
As a group, regional telecom stocks now are down 44 percent from the highs. The big losers include paging giant Metrocall Inc. of Alexandria, the stock of which is down more than 90 percent from its high, and telecommunications equipment maker LCC International Inc. of McLean, the stock of which has dropped about 70 percent, largely because the company does a lot of business in Asia.
The standout telecom investment is MCI Communications Corp., the stock of which is trading only about 10 percent below its high. MCI is about to be acquired by WorldCom Inc. in a stock swap that has stabilized the price of the shares.
Other "survivors" in the industry include Arguss Holdings Inc. of Rockville, which installs video cable systems. The business may be mundane, but the mere 20 percent drop in Arguss stock price is a veritable victory. E.Spire Communications Inc. of Annapolis Junction, which provides phone systems for business, also looks comparatively good. Stock of the company, which was known as American Communications Services Inc. until a few months ago, is off about 20 percent.
In the local software industry, where the average stock is down 40 percent, a drop of 20 percent in a stock's price is considered a moral victory. As of Friday only three of the 19 regional software stocks had fallen so little -- Landmark Systems Corp. of McLean, Best Software Inc. of Reston and MicroStrategy Inc. of Vienna.
Landmark Systems shows how investors avoided getting burned by simply staying away from the flame. Landmark is a market leader in its niche -- software that maximizes the efficiency of systems -- but it has never been a hot stock. Only a couple of analysts follow the company, the shares of which peaked at $10 and closed Friday at $9.87 1/2.
MicroStrategy remains the one hot software stock left. MicroStrategy makes "data mining" software that can extract valuable facts from vast mounds of raw information. The company went public in June at $12 a share and closed Friday at $40. That's down about $4 from the peak, but no one's crying.
Before MicroStrategy, the hottest local software stock was Manugistics Inc. of Rockville, the leader in systems for managing inventories for big enterprises such as Giant Food Inc., one of its first customers. Since Manugistics missed its earnings target a few months ago, the stock has lost two-thirds of its value.
Among biotech and Internet stocks, losses of more than 50 percent are the pattern, but a few stunning successes pull up the averages.
Shares of America Online Inc. of Dulles, the best brand name in the industry, are off 20 percent from the peak, about the same as the drop in the stock of PSINet Inc. of Herndon, which builds Internet systems for business. Local Internet stocks are down an average of 38 percent, but without those two companies the average would be down more than 50 percent.
Biotech stocks, long the most speculative technology investments, have lost an average of 44 percent. Shares of Life Technologies Inc. of Rockville and Medimmune Inc. of Gaithersburg have suffered single-digit losses while the once-overheated stocks of Entremed Inc. of Rockville and North American Vaccine Inc. of Gaithersburg have fallen about 75 percent from their peaks.
But look at the aerospace industry, much of which is considered old-tech by today's standards. The two biggest local defense contractors have done the best, with shares of General Dynamics Inc. down only 7 percent and Lockheed Martin Corp. shares down 17 percent. Contrast that with the aerospace upstarts that have ambitious plans to build satellite networks; Iridium World Communications Inc. of Washington and Orbital Sciences Corp. of Dulles have seen their stocks drop almost 50 percent.
Stocks of information technology companies, which used to be called computer consultants or systems intergrators, also have suffered less because most of them never got so overpriced. Only a few small companies, most with stocks that were under $10 at their peak, have lost more than 50 percent of their value.
The star of infotech is one of the most venerable government contractors, American Management Systems Inc. of McLean, the stock of which hit a high for the year of $34.25 last Monday and closed Friday at $33.37 1/2.
AMS is never going to own the Internet, untangle DNA or revolutionize global communications. It's just going to go about its business, grow steadily and make money. Washington investors used to love companies like that. AMS shareholders still do. Maybe they know something.
Bearing Down on Tech Stocks
The stocks of Washington's hottest high-tech industries are taking the hardest hit as the stock market retreats, falling by 40 percent or more.
Software (22 companies)
12-month high $344
As of Friday $208
Aerospace (11 companies)
12-month high $413
As of Friday $293
Biotech (19 companies)
12-month high $442
As of Friday $247
Internet (11 companies)
12-month high $326
As of Friday $204
Telecom (15 companies)
12-month high $890
As of Friday $499
Information Tech. (21 companies)
12-month high $386
As of Friday $255
Industry totals are based on one share per company. |
