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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Clint E. who wrote (15995)	5/13/1998 3:10:00 PM
From: Jeff lin	Read Replies (1) \| Respond to of 68226

Clint, do you plan to hold your dell and hwp short through earning?? Thanks.

To: Clint E. who wrote (15995)	5/13/1998 3:16:00 PM
From: Johnny Canuck	Respond to of 68226

Clint, >>I've been so tense all day. It's funny, some of the stocks I watch have been acting that way too. I see a lot of stocks trapped in very narrow trading ranges on lighter than usual volume. Everyone is waiting for something. I wonder what the trigger will be. I thought the PPI number would cause some sort of reaction, but it was higher than expected. It has seen negative increases the last few months if I remember right. It looks like they are ignoring this as 1/2 of the gain was due to tobacco price increases. Harry

To: Clint E. who wrote (15995)	5/13/1998 3:22:00 PM
From: Johnny Canuck	Read Replies (1) \| Respond to of 68226

Clint, Two candidates for the short side. Harry ***************************** APPLIED MATERIALS INC. (AMAT) 39 3/8 +1 7/16. Shares of semiconductor wafer equipment manufacturer are performing rather well today, considering that the outlook remains rather cloudy. While the company managed to match Wall Street expectations with its Q2 results last night, it cautioned that circumstances in Asia are not particularly good and does not expect any major turn around in capital spending conditions anytime soon as the semiconductor sector continues to be hampered by an oversupply in the DRAM market. Revenues in the period rose 31% from a year-ago to $1.176 billion, but fell 10% sequentially. Likewise, gross margins from a year-ago improved to 47.1% from 46%, but fell sequentially from Q1 level of 48.1% of total sales. The numbers are certainly in keeping with the turmoil in the semiconductor sector and the best one could have hoped for considering the reduced spending schedules for the sector. And while the outlook for a continuation of the spending trend is not too surprising, what has helped the stock today is the fact that Wall Street has remained supportive. For the most, Wall Street continues to view the stock favorably, shaving earnings estimates for the next couple of fiscal years, in keeping with the guidance the company provided, yet maintaining positive views about the stock going forward. In fact, most Wall Street firms are positive that a turnaround in the semiconductor sector will occur sooner rather than later and are continuing to recommend the stock. Only BA Robertson Stephens has downgraded AMAT, and they went from a "strong buy" to a "buy." Considering the slowing business activity in the US and Taiwanese markets, the way Wall Street has lined up behind the stock must be considered a major win for the stock. Chart 14:10 ET **** DAYTRADER: The stock is up $%@k3*g 209%, on some @#%%s@#t Internet set-top box announcement: It's gotta' be a short!. You can be sure that's what some traders were saying about C-Phone (CFON 8 11/16 +5 7/8) shares this morning when it was up 50%, up 90%, and up 165%. But even with your ordinary Internet-related one-day superstar, the safest approach to shorting the stock is to wait until the day after the initial pop in price has occurred. The last thing you want to do is get in front of a moving train, particularly if you have never traded that particular stock before. Once CFON shares rose the first 50% and held, a warning signal should have gone off in your head. Yea, a month ago, small-cap "Internet" stocks were being launched for triple-digit gains by daytraders, but that euphoria has begun to fade. Moreover, CFON's set-top box news was barely worthy of mention. Of course, these are some of the very reasons that some daytraders have no doubt used to justify shorting the stock at much lower levels today. But, before you ever short a fast-moving stock, you should first look at the price chart. CFON's chart reveals that the stock spiked up in price late last year, going on to more than double in price. A little research would have also revealed that for awhile, CFON was a big-momentum stock -- the type of play that short-sellers would expect to crumble once momentum players moved on to the next hot concept (e.g. oilfield drilling/services, help-desk software stocks, cancer-related biotechs). A quick look at CFON's fundamental information (as supplied by recent momentum name MarketGuide), would have revealed that CFON sports an extremely high short-interest ratio of 7 days (for explanation of short-interest ratio, see earlier CFON piece). Once seeing that the stock has such a high S/I ratio, the first thing you should think is to beware of the short-covering rally, which is fueled by the stock taking out stop orders placed by long-term shorts and by new shorts covering their positions as the stock moves higher throughout the day. Okay, now that you know why a stock such as CFON is capable of making such a seemingly absurd move, the next question is how to play it. While this stock is likely to begin heading south again by mid-morning tomorrow, potential short players should be aware that the downside is probably not as great as you might expect. Because today's rally is largely fueled by short-covering, there will not be as much profit-taking once the stock begins to retreat. Why? Because the people who are covering their short positions are simply replacing the shares that they borrowed earlier. So unless the original holders of the shares or insiders begin to dump the stock, the downward move is not likely to be as profitable near-term as most would imagine. If you do decide to short this stock (which we are not recommending), be careful of the next short-covering rally which is likely to occur about two days after the stock begins to crack.