SMTC appears over-bought using several Technical Indicators, but SMTC has been hard to guage using technicals since I began looking at it.
1. MACD is at 1.57 with trigger at 1.03 and diverging. Last time SMTC cruised into this territory, it retreated when when MACD reached 1.90 and gave up 25% (from $28 to $21) in the process. Something similar could happen again in about 4 trading days if history repeats itself, but this occurred when the industry was in a downtrend.
In the fall of 1997, SMTC absolutely ignored MACD logic, and went on a wild ride up until MACD reached 2.23, when the price reached about $30 (post-split). Todd mentioned something that is worth repeating, because it hinted at the impending slide. He noted that from the time MACD topped on August 29th, 1997, the stock price continued to rise until it reached $35 1/4 on October 9th, 1997 despite MACD beginning a noticeable down trend. His conclusion was that since the last price moves were not supported by the technical indicators, it was a sign to watch for potential trouble. Lesson learned ... Watch MACD, if it begins to top out, be aware the price may follow suit.
2. RSI has been on the rise, currenty at 69. Conventional wisdom says buy when RSI falls below 30 and sell when it moves above 70. It just did that, then fell to 63 but rose back to 69 after Friday's nice move.
SMTC totally ignored RSI last summer and fall, and in fact it had me so screwed up trying to figure it out, I still laugh when I think about how determined I was to make sense of it. Duh George, I don't think so.
From May 9th, 1997 until September 12th, RSI ranged between 55 and 80, spending MANY days returning above 70 after hitting 55 in complete defiance of conventional wisdom stating it should return to 30 before beginning to climb again. SMTC was one HOT property last summer, and anyone and everyone seemed to want a piece of the pie. Sounds familiar, so it could play the same game as last year, or behave like normal this time. Watch RSI ... so you can determine absolutely nothing at all :o)
3. Williams %R is currently at -8, has pegged 0 recently, and has begun oscillating well above the -20 line that is the standard to indicate over-bought conditions. Just like RSI, Williams %R defied the norm last year, and merrily flew in the stratosphere for about the same period that RSI did. If anything, it appears that RSI and Williams %R behave in similar fashion, moving in concert. Watch Williams %R ... as a means of validating the accuracy of the absolutely useless (in SMTC's case) RSI indicator.
What comes to mind is a few points that are subjective, and only my opinion:
1. SMTC last year was a heavy momentum stock, and behaved in a manner that did not fit typical technical indicator patterns. As such, these measures were difficult to read, and did not provide much useful information which could be used to make intelligent decisions.
2. MACD appears to have been the most useful technical indicator, in trying to predict price moves. Somewhere back last summer, I noticed a pretty clear trend in MACD, that was regular and continued for a good period of time. If the same trend begins to appear, the price may follow a pattern just as it did last year (dig in the original thread, and you'll find a post worth reading that details this pattern).
MACD can at least be used to warn of possible trouble; if the price continues to rise even though MACD is falling, watch out because we got an ill behaved baby on our hands again. If it follows MACD along like a puppy dog, then maybe it can be used to begin playing the game I mentioned in that post last year.
3. SMTC is making a name for itself, and all this leads to possibly the most logical conclusion. If we can't determine in advance where its going with much accuracy, and we already know it is one dynamite company with an outstanding future ahead of itself, does it make the most sense to long-term invest by holding, and adding to your position when excellent opportunities like this year present themselves?
I have all my original shares from last year having sold none, and also have additional shares that I bought too early, during the slide down that began last October. I will continue to hold all, since I feel the answer to my question is to hold & accumulate shares for the long haul. I may only do one thing different from last year, I may try to use a small additional amount of money this year to play with SMTC, if it looks like the opportunity exist.
All this confusion and uncertainty serves as a reminder to me that the best I can do is invest in top notch companies, which under the guidance of platinum management, are executing a clearly defined business strategy. Read back as far as you want, from the very beginning Jack Poe has stated that it is his goal to grow this company, by investing in the very best design talent that can be obtained. That tells me he has lived to his word, and it also tells me if you get hired by SMTC you are probably one sharp cookie :o)
Regards, JB |
