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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study! -- Ignore unavailable to you. Want to Upgrade?

To: XOsDaWAY2GO who wrote (8535)	9/12/1998 6:47:00 AM
From: virgil vancleave	Respond to of 14162

If you look at the chart a little longer ter, you can see technically that if low 40's were broken, next area of support is at 30. That support doesn't look very strong. Stronger support would be a range of 22 to 30 with more support at the lower number. Luckily for longs, the 40's held, this time. Fundamentals just don't warrant such a high price. Price to sales is over 20. 55 is another are of support since it corresponds to a moving average. hope this helps. good luck

To: XOsDaWAY2GO who wrote (8535)	9/12/1998 11:53:00 AM
From: Herm	Respond to of 14162

Hi Barbara, Virgil, and Family Lurkers! CHART READING SIGNS You ask a good question Barbara. Although, I did chuckle from Virgil's answer. Virgil is an experience investor and really does know what he is talking about. We all can learn from him and others on this forum. I think Virgil's answer may still have you wondering what the heck are we looking at! We are looking at fear, greed, and the heavy money locomotive as it is plotted on a chart. Plots of dots on a chart mean nothing by themselves. When you attach the fact that the dots represent institutional and people's money then you start to realize the dots chained together form lines. Those lines over time form trading patterns. And finally, trading patterns repeat themselves. Why? Because humans react insinctively to pain and greed. The pain comes from the fear or actual realization that you are losing money. The greed comes from the experience of fast profits that can be made in the stock market. Once you taste it you want to repeat the process. The summation of all human actions and outcomes is in that chart. The principle ingredients are: 1. stock volume 2. stock price 3. stock value P/E 4. news events 5. investor's perception (positive or negative) bigcharts.com Let's apply the above ingredients using the chart above set with Bollinger Bands (red lines above [upper] and below [lower] the moving stock price. The second chart under the first is a Relative Strength Indicator chart. There are internal and external factors which could impact investor's perceptions which results in a change in the stock price! Yes? The external ones are harder to discover since you have to do your homework. Example, watch for news items which MAY impact a stock. Plane crashes results in lawsuits. Lawsuits cost money. Money for settlements is money not going towards earnings. Hence, the price drops in accordance to our perception. The above mentioned events would show up in a technical chart as decreasing stock price, decreasing RSI with a right downward slant, an increase width between the upper BB and lower BB with a right downward slant. So, right downward slants are decreasing values. Now, here is what we are looking at in regards to LHSG. The externals tell us that the stock Price/Earnings of LHSG is TOO HIGH! LHSG : $56 7/16) $2,813 million Market Cap at September 11, 1998 Employs 456. Trades at a Premium PE Multiple of 128.3 X, vs. the 25.1 X average multiple at which the Data Processing SubIndustry is priced. The externals tell us that the overall markets are in a Bearish mode. Everyone is on egde because fear is becoming very real to many investors. That fear is based on the pain of losing money in the stock market! The fund managers are paid bonuses on performance and that is being dragged down big time lately. Thus, they will exit or short stocks that have extended fundamentals or are technically are showing signs of weakness. They can read technicals just like we can and we know they are ready to react technically when the stampede is triggered. Now, what are the internals in the LHSG chart that points to the above conditions: 1. LHSG price tag off upper BB (overbrought condition)and bounce off. the normal trend is downward from the current $56 level. That is a right downward slant in the price movement towards the lower BB to around $40. That is a nice price spread for shorting LHSG stock or buying PUTs. Look at the chart! A great many of people paid more than $56 dollars for LHSG. As LHSG stock price drops they will be tempted to sell and stop the losses and their pain. That is human nature. MANY investors don't know how to use PUTs or stock shorting against the box in order to hedge during normal sharp downward moves. I repeat! I know I was once in that category and I lost money like the rest! NO MORE! NO WAY! Most investors can't read charts and they have no idea of how to allow the "trend to be their friend." 2. The RSI for LHSG is confirming the facts above. The RSI is dropping and will fall below 50 AGAIN! Meaning? The bias is turning negative and the RSI is downward right stanted again! Look at past history for LHSG and you will see the typical amount of the price drops and how long it took. The width between the upper and lower BB is a good gauge. History repeats over and over if the variables remain the same. Why? Because people will react to the fear and greed the same way! 3. Look at the LHSG price spikes ($step level) and that is where the big money jumped in. Fall below that point and the stock will tumble to the next lower "step level" which can be considered the price support level. How do you know where that is? Typically, plotted price spikes and peak RSI readings. LHSG supports came at the $24, $29, $39, $49 because the RSI and price pivots are evident. The means that the RSI reached high levels for this particular stock. Note, you need to read and learn what the RSI high is for that stock. It is different for each stock. It is like reading a gas gauge. When do you rush to the gas station? I may wait for a 1/4 tank. For others, it may be empty red light signal. Well, funds and MMs will exit at different points and form a pattern. Actually, they program their computers to sell into the buying by fading a stock. The LHSG chart indicates that a new high was reached recently and two attempt were made to match or exceed that mark. LHSG has not been successful in that attempt. Nor can LHSG continue to hold the current price levels. Below are the volume stats. The Sept. 08 is a technical rebound and short squeeze from all the covering. The next day the big money ran out and took profits. They tossed a match into the dry shorted shares and it went up in a blaze. The next day they sold their shares for quick profits. The volume is going down again towards normal levels of 338,500. Sep 11 56 7/16 - 9/16 -0.99% 58 3/4 55 1/16 566,700 Sep 10 57 +1 3/8 +2.47% 57 50 751,100 Sep 09 55 5/8 -4 1/2 -7.48% 57 3/8 55 618,000 Sep 08 60 1/8 +10 3/8 +20.85% 60 11/16 50 3/4 1,105,100 Sep 04 49 3/4 +1 5/8 +3.38% 50 47 5/8 170,700 POSSIBLE LHSG PUTS? LHVH 40 OCT @ 1 15/16s might pay out well. tscn.com