Lindt, You'll Appreciate This...
Just found a TA perspective that was posted by someone
on the main SEEK thread... which in turn was taken from
a poster at www.ragingbull.com... Now, that we're clear
on heritage, here we go. I don't pay attention to this
stuff, but, maybe it will make sense to you...
**********
"Technical Analysis for the Masses
Someone on the Yahoo board posted a message indicating what dire straits SEEK was
in because it was going below the 50 and 100 day moving averages, and cited the value
of some other technical indicators as "proof".
I like to explain so you can learn by doing, and maybe enhance your understanding and
appreciation for the value of Technical Analysis. Now that there is a forum on the
Raging Bull where we can "Ignore" the trash talkers, some valuable information can be
exchanged by people who are here to make money.
At the outset, let me explain I am neither a lover nor hater of InfoSeek. I don't care
whether the stock goes up or down, as long as I'm on the right side of the movement. I
want to make money when it's value goes up, and I want to make money when it goes
down. So when I post messages here from time to time, I'll try to have logical
explanations for why I am Long, Short or Neutral.
Regarding the moving averages previously stated. Moving averages only do us any good
when they are meaningful in the past, or show some trend in the present. And it is
important to understand there are many different types of moving averages. The writer
on the Yahoo board was correct if you use what are called "simple" moving averages,
but those averages don't reflect what is really going on.
I invite you to visit the following site, using a second window in your browser so you can
refer back to my notes.
cbs.marketwatch.com
Set the "Symbol" to SEEK, the "Duration" to 90 days, then click the "Set Defaults"
button. You will then see you can set the values for several different indicators. Click on
the "Exponential Moving Average" button, and enter 100 in the period box. Click
"None of These" for all of the indicators so as not to confuse you when looking at the
chart. Now click "Get Chart".
The purpose of this is to show you that the 100 day exponentially smoothed moving
average reflects a pretty good support area. The price has been flirting with, but has not
closed below that line for six days. This is good news for the Longs, and may indicate a
good buying opportunity. However, you can't (or shouldn't) make decisions with your
money based on one indicator. Unfortunately, the CBS chart I have had you link to
does not have anywhere near the information available for analysis as I have on my
computer. So some of the other things I talk about you will have to research by some
other means, or assume I'm passing along valid information, which I'm confident you will
learn to trust.
Fibonacci Retracement Levels are widely and very accurate support lines, and are
drawn on a chart by selecting a peak (45 on 04/16/98) and a trough (6 1/4 on
10/28/97). From these extremes, lines are drawn at 23.6%, 38.2%, 50%, 61.8%, and
others from the peak (in our case). For SEEK, the 61.8% retracement line is at 21.
Again, this indicates very good support at 21.
As I said, Fibonacci Retracement Levels are drawn from peaks and troughs.
Interestingly, there is another trough that can be used, and this is at 7 3/4 on 12/26/97.
Buy using these peaks and troughs, the 61.8% retracement matches exactly with the
100 day Exponential Moving Average. Now our support level at ~22 5/8 is even
stronger!
There are other indicators indicating support at 22 5/8. My message here is that it may
be a good time to buy, as your down side risk may be limited to only 21 (the other
Fibonacci Support line). Proper use of your Stop Loss orders should prevent you from
experiencing a significant loss of you decide to buy at this level.
OK, now what about resistance at the upper level?
Go back to your chart, and draw a line from the peak on 04/16/98, to the peak on
0/04/98. You get a descending line, which becomes resistance. This line is confirmed by
a number of other indicators that I won't discuss here, except to indicate which they are.
The Parabolic SAR and the Raft Regression channel also confirm this descending
resistance line exactly.
One other piece of information to look at are the Bollinger Bands, indicating that some
movement in the price of SEEK will happen in a relatively short time frame.
What all this means to me is the following:
SEEK will begin some probably significant movement within about 3 days when it goes
above the Resistance line (about 24 1/2 today) or below the support line (22 5/8
today).
What should you do with this information?
Buy while it is in this range, or.
Sell while it is in this range, or.
Wait 1-3 days for a breakout, then buy if it goes above the resistance line (24 1/2
today) or sell if it goes below the support line of 22 5/8.
You should always place Stop Loss orders when you take a new position, to protect
you if you chose the wrong direction.
This is Technical Analysis. If you find it has been useful to you, please so indicate and I
will be back periodically.
Good Luck. |
