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Strategies & Market Trends : Fidelity Select Sector funds -- Ignore unavailable to you. Want to Upgrade?

To: Bill Turk who wrote (661)	1/21/1998 4:55:00 AM
From: Bernie Kaplan	Read Replies (2) \| Respond to of 4916

Once again, Energy Services is trying to convincingly break out of a lengthy downtrend that has now lasted for a bit over two months. It is getting very close to a showdown with a major resistance trendline that truly needs to be broken before this fund establishes itself as a viable investment. Its price action since November 5th has been extraordinarily volatile. In fact the fund has taken on characteristics that are extraordinarily different from its usual behavior of the past couple of years. Sort of like suddenly changing from a fund with a Beta of .8 to one with a Beta of 3.5 overnight. Since its November 5th peak, it has made the following major price moves: Lost 21.1% in 17 market days Gained 13.3% in 5 market days Lost 18.3% in 11 market days Gained 13.7% in 5 market days Lost 21.1% in 7 market days Gained 16.2% in 5 market days Observations. Declines are approximately equal although the time it takes for the fund to fall is getting shorter. Much more volent to the downside when gravity takes over. Moves to the upside also very similar, and the 5 day pattern is an interesting anomaly. As a result of these moves, the fund has continued to fail to reach its previous highs, and has steadily fallen to lower bottoms. Not a good sign from a technical standpoint. As tempting as it may be to try to latch on to its recent or two previous up moves, they have only lasted 5 days, and it has been far too risky to try and guess the right moment to buy. After the 13.7% move, for example, the fund actually did break through a resistance line, which prompted many investors who rely upon technical analysis to purchase the fund. Unfortunately, it turned on a dime for no apparent reason starting the very next day, with significant damage that generally resulted in losses. All told, the fund is still 24% below its November 5th peak. Lots of room to the upside, but investor's commitment to the sector has been very short lived. Despite our infatuation with this sector, it pays to wait until a true technical breakout occurs in order to be convinced that a rally will last. The fund may very well break out with a strong day today, and under those circumstances waiting an additional session(s) to insure against a sudden reversal is still prudent. Even if we miss the next 5-7%, for example, there should still be 15-20% of upside left to its all time peak, which certainly wouldn't be a bad gain if we bought the fund and things worked to perfection. Patience is the key despite temptation and the heartbreak of missing these short and profitable moves. As far as the fund's response to Saddam's sabre-rattling, maybe he is a big investor in the fund and has noticed the pattern too !! Bernie Kaplan