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Strategies & Market Trends : Stock Attack -- A Complete Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Chris who wrote (13296)	7/28/1998 12:48:00 PM
From: Robert Graham	Read Replies (1) \| Respond to of 42787

Good observation about the novice buying. The pros were taking the other side of that transaction. Looks like WCOM dropped over a point, but not too bad considering the gain made yesterday and the down market. INTC is performing really well. Just think about this for a moment. We are seeing a breakout from a consolidation during a market adjustment and a down day (DJIA is down 90 points). Incredible! As long as the market stays above recent lows, I think INTC will continue to perform. If recent lows are broken, next stop is 8750 for the Dow. This move to 8750 will further hurt market sentiment. Market sentiment has definitely shifted as we are seeing continuing evidence for. The market has now given up its gains it has made yesterday. If it closes at its low today, which is a call that is a bit premature, then this would be considered "price rejection" by the market and we will likely not see above 9000 for a period of time. A note on PHYC. PHYC went to test its bottom at 8 1/4 but instead formed a new interim bottom a couple trading days ago at 8 1/2. Yesterday it retested that new interim bottom consecutive times. This formed an intraday support. Later in the day it broke through that support to retest its earlier bottom at 8 1/4. Ordinarly a retest of a bottom made during a sell off is what a healthy stock does in the latter stages of its sell off where more confident buying can then come in to move the stock up. But in this case, this event was very bad news for a couple reasons. One is that the intraday resistance established at 8 1/2 now is resistance to price movement back up. Second is that it happened under low volume. The sentiment has been very negative for this stock for some time which has been in a longer term downtrend with a high and growing short interest. During the earlier stages of the sell off, virtually no position buying came in. It was all day trader activity from what I can tell. So what we see here is a stock that has no buying, but a moderated but steady selling. A stock can move down good distances when this happens where the volume is deceiving. Also supports tend to not be respected when this happens. Now that stock is below 8 testing its support at 7 1/2 that it made about 5 years ago. The stock PHYC is in control of the shorts and has been for some time. Shorters think differently than most people. First, they tend to become more attached to their position compared to other market players. This is because they are playing against the current performance of the stock and possibly even current fundamentals. In order to be able to do this, they have to be able to detach themselves from the current reality of the situation. This provides them with more room to imagine a reality they think is more applicable to the future direction of the stock. They also tend to be very stubborn, even when the current reality goes against them like the price moving up on the stock, at least until they are forced to cover which means they will be back in at the next opportunity to short the stock. When the stock moves down to validate their thinking (feelings), then instead of taking profits, they feel vindicated. This means that even though they can cover for a good profit, they see the stock moving down more to continue to validate their views. So they adjust their target price downwards. We are talking about feeling here motivating their actions. So the sentiment for the stock continues to worsen possibly well beyond and fundamental reasons they may have initially had which may have come true. IMO it is difficult for a stock to throw off a well-established shorting interest and the negative sentiment that comes with this participation in the stock. This is particularly true in the case of PHYC. PHYC has been reported poor earnings growth for a period of time now including a botched merger attempt. This has validated the shorters who are holding their position for a larger drop in the price of the stock. Bob Graham