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Technology Stocks : Compaq -- Ignore unavailable to you. Want to Upgrade?

To: FR1 who wrote (12267)	12/30/1997 1:02:00 AM
From: Rick Slemmer	Respond to of 97611

Franz: Can someone who is good at TA convince us why we should not worry? I would like to hear an analysis of how Compaq can absorb all this and still go up 20-30 points in the next 6 months. Well, I like to think I'm pretty good at TA, but if you want a Pollyanna rose-colored-glasses optimistic view for CPQ, I'm afraid I can't help you there. At least for the near-to-intermediate term. Splits mean squat. Sure, it lowers the price so a lot of smaller investors can join the club, but a split is by no means a sure road to riches. Oh, I know the arguments: "Show me a company that has split and not gone up!" Well, in a raging bull market such as we've had for the past five years, stocks go up whether or not splits occur. And if you really think a split always helps, have a look at VVUS. They split on the way down from 31 to 18 last spring, and I'm sure you can find plenty of other examples. If splits were a sure way to boost the share price, why doesn't every company split 2-for-1 each month? CPQ's trend is down, and it looks as if it's stabilized at the 55 region, either resting from its decline or trying to establish a base. However, stock internals (like OBV) are weak, it's still below its 30-week moving average, and the intermediate-term 50-day MA is headed south in a hurry. I've heard all the CPQ bulls here praising Compaq computers (hey, I like them myself) and accusing nonexistent market makers of manipulation, but don't make the mistake of believing that the stock only goes up. Before I get flamed, I think you guys who sleep with the 5-year chart under your pillows are right (although I do wonder why you're even on SI with that sort of time horizon); CPQ will one day exceed your wildest dreams. It's here to stay. But the stock is weak now and needs to find a bottom from which to base its next run. It's a fact of life, and one from which you can profit if you avoid falling in love with your stock. Short the stock when it falls below the 50-day MA, then cover at a comfortable bottom and buy some long for the ride up. For crying out loud, there's nothing wrong with making money when the stock moves either way. Instead we have hysterical bulls making wild predictions of post-split rallies and comparing cross-country prices of Presarios in an effort to second-guess the earnings statement due out in over three weeks. So, Franz, "someone good at TA" thinks that 20-30 points in the next six months is unlikely but not impossible. The stock first needs to define its bottom trading range, usually after two or more tests of that level. The last successful test was at the 40 area in May and June. CPQ might stage a test anywhere along the line. 52 was tested lightly in November and December and held, but it doesn't look too sturdy to me yet. You probably didn't want to hear that. I'm not here to convince you or anyone else that they're wrong - I've been wrong enough times to know that's hypocritical. I'm here to say that my indicators on CPQ for the near and intermediate terms are bearish, and these same indicators have worked enough in the past for me to put considerable faith in them. In the market, it's OK to be wrong. It's not OK to stay wrong. If you're looking for free advice, here it is: if you already own CPQ, hold it and wait for the next definitive move. If it moves up, it'll try to pass the 30-week MA at 60. If it fails that test and closes lower, sell quickly and wait for the next consolidation at 55. If it drops below 52, it's looking for another bottom and will probably test the 40 level again. Either short it or sit on cash until it bounces off 40 with good volume. Then you can buy with minimal downside risk. Good luck! RS