Analyzing Dell's Chart
(from Gary Smith's column in TheStreet.com)
Question
I wanted to get your take on DELL. To me, it looks to be in a trading range of 61 to 69. Using the patented GBS [Gary B Smith] technique ;-), would you go long once it broke out of the range to the upside? Another idea would be to buy around support if DELL got that low again. My reasoning behind that comes from looking at the graph for the past year. When the stock breaks out of its trading range, it has always been to the upside. So why not go long in the low 60s? (Peter Schmotzer)
Answer
Peter, we're in agreement that Dell (DELL:Nasdaq)is in congestion right now. However, buying on a breakout is tricky because Dell then has to take out two prior highs: No small feat for a pricey stock. So I guess I'd wait to see how strong the breakout was and go from there. Your other strategy on buying at the bottom of the range is certainly an option. If I did it though, I'd be guessing. In short, I have no confidence, nor supporting data, that buying there would be a winning strategy. In fact, there's no assurance Dell will break to the upside. However, others might be confident, so that's a trade they might make. And, I guess that's the difference between analysis and trading: A lot of people can read charts and come up with a thoughtful conclusion. Before you trade, though, make sure you have at least some data to support your thesis. |
