>> All I am discussing is the near term prospects for SNRS
Optmaster,
With Rainier's permission, I am posting a brilliant analysis
of SNRS and short term prospects. In addition, my other TA
friend, whom is probably best TA on Silicon is short term
bearish. I hardly feel insecure over an open discussion
of SNRS......after the run we had, it is foolhardy to think
we will not retreat. Please keep the input coming....Skane
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"Based on traditional valuation measures, SNRS has always been expensive. But the fact is, people just don't care about the valuations, at least not the traditional measures used like P/Book or P/Sales. The interesting part about this concept though is that the lack of concern for valuation removes one of the largest gravitational factors to stock prices: the awareness that a stock's value has exceeded that warranted by standard valuation methods. That in itself provides the ironic twist that reduces the downside risk to the stock. Once you take out that gravitational pull, the stock's trading behavior moves closer to the emotion spectrum, far beyond the range warranted by fundamental analysis. In that case, that is where technical analysis becomes more useful. It quantifies the unquantifiable.
But before we move into that subject, a note on valuation:
Think EBAY was expensive? Many people did, and still do. In fact, it was considered one the most highly valued internet stocks out there, based on price-to-sales (P/S) ratios. EBAY has a P/S ratio of 204, and a P/B ratio of 177. In comparison, SNRS has a whopping P/S ratio of 1343! P/B is "more" reasonable at 85. Let's look at another internet stock, AMZN: P/B of 261, and P/S of "only" 23.
I would say that the market has been overly aggressive in recognizing future potential revenue for not only this stock alone, but for the entire industry. I am making the assumption that real cumulative sales are but a fraction of the following companies' market caps:
SNRS: 795mm
VISX: 5.9bil
KERA: 381mm
LASE: 261mm
BEAM: 774mm
LCAV: 596mm
Based on these valuations, it would appear that the market has chosen VISX as the Gorilla of the market (Dave, look!) It is unfortunate for VISX though because SNRS clearly poses a legitimate substitution threat to VISX's current procedures. In fact, in my opinion, the methods used are superior. Their procedure, which is represented by the phrase, 'Less pain, and all the gain' is perhaps the key factor that can remove the bottleneck to the industry's pending "Tornado". (To understand this vocabulary, it is important to read the book "Gorilla Game.") Perhaps that is where the market is trying to take it. (Dave, I think this can be one potential subject for the Tornado thread. The players are real-life examples that follow the book's outlined methods.)
Anyway, let's get back to the subject of TA, which is what you originally asked for:
Number one, always limit your plays to the strongest sectors. Even bad boats are lifted by the rising sector tide. The indeed is the case with the Laser Vision Sector. This sector's strength rivals even that of the Communications Service Sector of the S&P500, and that already is considered to be the strongest one in the pack.
It looks like SNRS, which has been a relative dog in the sector, is finally being recognized as an attractive laggard in the sector, along with KERA. Look at the similarity in the runup to the two stocks.
The entire sector triggered a buy signal on 6/28/99 according to my indicators, and despite the strong runup, has not even triggered a short term sell signal yet. That's trend-following that has become one's friend in this case. I do, however, expect the positive rate of change to decline from this point forward. Whenever the group as a whole had moved this strongly, a deceleration in price appreciation soon followed, but due to the strength of the sector, only faced mild pullbacks in valuation.
DeMark's indicator that is included in SuperCharts has tended to be a bit early at times in flashing a sell signal when a runaway breakout has occurred. However, he covers himself with his well-known Sequential Setup. After NINE straight consecutive good runs, his famed Sequential calls for the market to reverse sharply. Currently, the count is at EIGHT. I can imagine some shorts getting ready to rub their hands with glee at this prospect.
1. Active Balance Channel has been overbought for the past few days, but the short term trigger hasn't reversed yet.
2. Don't bet on it running longer, however: the DAILY price appreciation percentage has exceeded 2 standard deviations for an unprecedented 3 days in a row (based on a price pegged to a rolling 3 month period average). Note that this self-built indicator I am referring is different from Bollinger Bands. This focuses solely on one-day moves.
3. Price-to-market strength is in overbought territory as well.
4. The price has pierced the upper boundary of the upward trading channel under extremely overbought conditions. That's what happened in the buying enthusiasm last April. Once the price falls back within the channel, expect the buying pressure to reverse into selling pressure. This pending scenario may fall under the Dark Cloud Cover: It's possible the price will gap at the open, but only to close lower. This is a candlestick pattern that makes itself visible at market tops.
5. Wait for the candlestick confirmation in #4, or the Nine Count for the Sequential, whichever is first before taking defensive action.
It is because of the above that DeMark's indicators read the following:
"The relative position of all the indicators suggests a significant top is forming. Look for bearish price action within the next two bars to confirm this action."
Good luck, and have fun.
Rainier"
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