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Technology Stocks : PMC-Sierra (PMCS) -- Ignore unavailable to you. Want to Upgrade?

To: JZGalt who wrote (2566)	7/15/1999 4:19:00 PM
From: Trader Dave	Respond to of 3818

Priced for perfection and we got it.

To: JZGalt who wrote (2566)	7/15/1999 4:22:00 PM
From: zbyslaw owczarczyk	Read Replies (1) \| Respond to of 3818

0.22

To: JZGalt who wrote (2566)	7/16/1999 3:55:00 AM
From: Toby Zidle	Read Replies (1) \| Respond to of 3818

Hi JZG.... My 3 AM responses aren't my clearest, so I'll only touch briefly at a few key points. We seem to have trouble in projecting a lower limit for a retracement by PMCS. I had suggested about $63, as both 10% off the recent intraday High and as a support from a 20-day exponential moving average. You had initially suggested $50. Now you add in "Retracements of rallies on the order of 50-66% are common from my chart reading days" to suggest that "$57 to $60 on the downside isn't too implausible. Which is right about where the 50 day SMA is." Apples and oranges here, it sounds like. A 66% retracement (common?) takes us way down to $23. Bad news, for sure! Are you really thinking 33-50% retracement <$47 to $35>? Still very drastic! Well, you have one part right - $57 to $60 (50-day SMA) isn't too implausible. However, neither the 50-day SMA nor the 33% or more retracement matches your initial $50 call. So it's hard to get a feel for how much you believe PMCS will go down. I think the point you're trying to make is "it wouldn't matter for the long term investor." Here I'd have to disagree. A mere 10% drop (my hypothesis) won't matter. If you look at the charts, the 20-day EMA is a very good envelope, going back to October 1998 with only a few short-term failures of up to $5. That's why I consider a drop to $63 to be entirely consistent with the stock's behavior. The 50-day SMA at around $57 shows also to be a decent support base. However, the stock price gets down there only when the stock price has stagnated for a couple of months or more and the 20-EMA approaches the 50-SMA. Nonetheless, I can accept a drop to $57 as approaching a worst-case scenario. Now for most of the month of June, PMCS did not perform well. Still, a $55 Support Base held solid. This IS the worst case situation. I won't claim that PMCS *can't* fall beneath $55. It could get down to $10, for all I'd know, under unique circumstances. But here one can't say it won't matter for the long-term investor. Current 'long-term investors' have a large profit invested in PMCS. Protecting this profit certainly does matter. This seems to be the issue we're disagreeing most on. My view is that the long-term investor doesn't panic easily and will tolerate a drop into the mid-$50s with some minimal pain. If PMCS gets down to the 50-day SMA or the $55 June support level, I think these investors (consistent with what you say) will gobble up all the available stock they can find .... BUT..... if distribution from those 'irrational institutions' you mentioned overwhelms the demand, those recent long-term buyers will cut their losses short by selling their new acquisitions and then their old holdings. This is an unemotional decision based on prudent risk management. It's how most successful long-term investors think. It's the very psychology of a support base failure. It does matter to the long-term investor. So we come back to my original comment that you think is wrong. "30% loss? I think that would shake some of the long-timers." A 30% loss is to under $50. Long-term investors are moving to less risky investments. This doesn't mean they don't come back. But you have to look at the chart to see the next lower support levels. In this case, some at $45, but mostly at the 3-month-long base around $35. What it then comes down to is that if PMCS can't contain itself within a 25% loss limit, it's likely to lose nearly a full 50%. In between is 'no man's land'. All of this is going to turn out to be very hypothetical. PMCS is in a strong uptrend that is bounded by the 20-day EMA on the bottom. Earnings came out today (yesterday, actually) and beat estimates. DJNEWS-16:10:20 Jul-15 [PMCS] PMCS UPSIDE EARNS ALERT: 2Q PRO FORMA 23C; FIRST CALL 19C While I didn't agree with charliex that we'd hit $85 next week, I do see a stable stock price environment. Thus, JZG, we'll disagree about the behavior of long-term investors, but we'll not have a chance to test it and find out who is right. Let's just stick with our PMCS investments and even pick up more when we encounter the inevitable small-scale pullbacks.