Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Strategies & Market Trends : Tom Dorsey Q&A -- Ignore unavailable to you. Want to Upgrade?

To: Ms. X who wrote (7)	2/26/1998 12:38:00 PM
From: Ms. X	Read Replies (1) \| Respond to of 102

Example of a fundamentally sound stock that didn't hold up technically. Jan, E-mail from client of mine. "Your comments on Dura helped me to decide to stay away from this S&P five Star Stock. Thanks ........ Our comments on DURA started on December 28 saying to sell the stock or to hedge positions as the stock had given a major sell signal. By January it had given another major sell signal and broke the trend line which forced us to reiterate our sell on the stock or to hedge. This second sell signal happened at $41 with the first at $42. The stock subsequently declined 50% to $20. (This is an exercise in Econ 101 which some prolific analysts on TV needs to get a handle on). There are two sides to the equation both fundamental and technical and anyone who only looks at half the picture will find themselves in situations just like this, time and time again. We believe strongly in fundamentals but the roadmap is equally important. Laslo Birinyi one of Wall Streets greats, pans technical analysis every time he has a chance. But his method is Money Flow. What is evaluating Money Flow if not a determination of whether demand or supply is in control, i.e. Positive money flow or negative money flow? He really is a technician but doesn't realize it. I have the highest regard for Mr. Birinyi and he is one of Wall Streets greats, but he should not lose sight of the fact that his method of "Money Flow" is technical analysis clothed in another name. Back to DURA. January 22, 1998 Vector Securities put a "Buy" out on Dura, Olde Securities had an Accumulate, CIBC Oppenheimer had a "Strong Buy" and on and on. February 24 Dura Pharmaceuticals Stops Trading with Earnings 35% below Expectations. How can this happen? 35% below expectations. Who had the wrong numbers? Apparently everyone had the fundamentals wrong. An interesting thing then happens and always does on Wall Street, the analysts that loved the stock before the halt in trading all lowered their opinions before the market opened the next day knowing the stock was going to collapse. The last opinion was lowered at 9.16AM on Feb. 25, 14 minutes before the stock was to collapse at the opening. When one looks back at the fundamental recommendations from these analysts they will see "strong buy" at a price of $38 and "Hold" (Wall Street code word for sell) at $21 1-2 where it opened. The point is, those who espouse only the fundamentals would have been caught with their pants down in a 5 star stock, fundamentally sound as dictated by Wall Street. Those who pan technical analysis just haven't visited the methods of the Point & Figure Method. If they believe in the irrefutable law of supply & demand, then they have to pay attention to the Point & Figure Method. They need to go back to the basics of the causes of all price movements i.e. the imbalance between supply and demand. There is a reason that Asparagus sells for $4.99 a pound in January and $.99 a pound in July. We attempt to avoid Winter Squash in the Summer and Summer Squash in the Winter. With a stock, if there are more buyers than sellers WILLING to sell then the price must rise. Conversely, if there are more sellers than buyers WILLING to buy, then the price must rise. If buying and selling are equal, then the price must remain the same. IBM is in such a situation right now. Rather than pan the irrefutable law of supply and demand, these analysts should spend a little time embracing the idea. I am sure it will help their credibility and their returns. Ranting and raving on TV will accomplish only one thing and that's hostility toward their own methods and ideas. Tom