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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: joe who wrote (19919)	7/30/1998 1:54:00 PM
From: Finder	Read Replies (1) \| Respond to of 45548

Looks like my tongue in cheek prediction of yesterday as to that being our one up day out of ten may turn out to be prophetic. What a dog.

To: joe who wrote (19919)	7/30/1998 2:01:00 PM
From: Wayners	Respond to of 45548

Good questions with regards to why do trendlines work. An uptrend is defined when a line connecting lows slopes upward going forward in time. A downtrend is defined when a line connecting highs slopes downward going forward in time. When the bulls are firmly in control, lines connecting highs and lines connecting lows will BOTH be sloping upward going forward in time. When the bears are firmly in control, lines connecting highs and lines connecting lows will BOTH be sloping downward going forward in time. When neither the bears nor the bulls are in control, you get a divergence between the lines connecting highs and lines connecting lows. For example, you can have an uptrend line and a downtrend line simultaneously--its a period of consolidation creating something that looks like a pennant. The theory is that stocks that are going up (uptrend) tend to continue to go up so this creates demand in and of itself. Stocks that are going down (downtrend) tend to continue to go down so this situation creates additional supply. So when you can draw an uptrend line, people want to buy at the lowest possible price--that price occurs at the uptrend line. When people want to sell on a downtrend or even short on a downtrend, people want to sell at the highest possible price--that price occurs at the limits of the downtrend line. It just comes down to people's expectations creating supply at uptrend lines and supply at downtrend lines. The supply and demand zones can be a little bit iffy. They create regions or areas of supply and demand, but not exact price points. There's no guarantee that the support or resistance will hold up either. Some lines are stronger than others. For example an uptrendline that has been tested 5 times over the last 4 years but price has always bounced off it it is much stronger than an uptrendline that has only been around a month and only been tested twice and price has bounced off of it each time. Personally I think just buying in anticipation of a bounce at an uptrendline is a gamble. I don't KNOW that price is going to bounce. I may think price is going to bounce--and that goes with the probabilities. So the way to play it is to put in a buy stop order above the uptrendline line and above the current price. If price bounces your order gets hit, momentum takes it higher past your entry point and you make money. If price breaks below the uptrendline, your order doesn't get hit, price drops much further and you lose nothing. Not much of a gamble in that situation. The trenline is there to help you place smart orders--not necessarily to tell you whether the trendline is going to hold or not. With COMS, price is currently just below $25. The uptrendline is at $24 3/4 or so. So the place to put a buy stop is above $24 3/4 above the current price of $24 15/16 and ABOVE the downtrend line connecting daily highs 24 and 29 Jul. Also add in a bit of a factor of safety. So a buy stop order at $25 3/4 would be good.