To: shane forbes who wrote (11173 ) 3/26/1998 9:56:00 AM From: Jock Hutchinson Read Replies (1) | Respond to
Here's the problem I have with getting too carried away with TA. The two different (actually three) periods of lows that you are referring to for recent LSI prices really had little to do with LSI. The low in '96 was a culmination of a sell off in techs that saw a mid day reversal, which set the stage for a dramatic run to the upside. Of course, the next time LSI came close to those numbers was last October at the end of the SEA sell off. The third time LSI approached the 18 dollar figure (although not quite finishing there, thus frustrating the mangy bears) the reason was somewhat LSI related. Thus macro lows over a large period of time are often anecdotal and not related to the actual stock . Over smaller periods of time TA does have more and more relevance since the number of external factors affecting the stock diminish. But even here there are pitfalls as one approaches day to day trading. Every specialist on the NYSE has a very good idea of how TA works, and will often place bid/asks to take advantage of TA devotees to the benefit of the specialist. Where does TA work best? Two areas it seems to me. First with a stock that has such strong momentum in terms of interest that it would be impossible for the specialist/dealer to manipulate the price of the stock. DELL of course is the best current example along with INTC for intra day trading. The second area is when TA is combined with the underlying story. For example, about three weeks ago LSI had hit the mid 22 range coming off of a high of 27 , which was a double top and thus resistance. LSI looked to have made a reversal and had finished at 24 post market. Unfortunately that day INTC announced that the upcoming quarter would be short. LSI along with the other semi market dipped. This was accompanied by a number of other semi announcements. Not surprisingly LSI did not regain its footing at the 24 level for a period of time. BUT WHAT IT HAS DONE IS BEGIN TO OUTPERFORM A NUMBER OF OTHER SEMIS This is the first time in a long time for that to occurr, and this is the trend that bears watching. Right now its's merely anecdotal--not a long term trend. But if it continues, LSI will be among the leaders in Semis when they begin their next leg up. Now, if everything else stays even, (which it never does) it seems possible that LSI will again challenge but not surpass the 27 mark just before the April earnings announcement. However, the problem with this scenario is that LSI's move to 27 was semi related--not LSI related and LSI will need to do the work more on its own or will will need some support from the other semis, which have now been beaten down a notch. But again I don't see that as near as important as compared to whether LSI outperforms other semis. But what I find most interesting is that if we are in a long term up move, the most important issue for a trader will be to establish the channels that define the highs and lows for moves up--i.e.higher highs and lower lows. And that to me is where TA becomes most important. The difficulty of course is filtering out the extraneous factors that are market driven as opposed to LSI related.
