Chuzzlewit & ALL, Must Reading If You Follow TA:
Dell stock may fall 10-15 pct - technical analysts
By John Hanley
NEW YORK, May 26 (Reuters) - Dell Computer Corp.'s
stock -- one of the most successful over the last 10 years --
could fall 10 to 15 percent in the coming weeks before it can
recapture its status as the darling of computer stocks.
That, at least, is the prediction of technical analysts who
forecast price activity based on past performance, and have the
luxury of ignoring fundamental factors like revenue growth,
market share and interest rates.
Stock in the No. 2 personal computer maker, one of the most
widely held and a key component of the tech-heavy Nasdaq index,
hit a five-month low on Wednesday and has dropped 40 percent
from its lifetime high of $55, touched in January.
By the close, lagging a rally in the broader markets, Dell
shares settled unchanged at $34.56, after touching an intraday
low of $32.87. Volume was heavy at 49.5 million shares.
"I just don't think that Dell is a good-looking story at
this time," said Elaine Yager, senior technical analyst at
Herzog, Heine, Geduld. She added, "I don't think the chart
looks good and I think rallies will eventually fail..."
Though the stock is starting to look "oversold," meaning it
has fallen too quickly and needs to bounce higher, she puts
successive support at $32, a previous low from December; then
at $29-$30, based off a measured move; and $25-$26, an October
low.
There are several reasons why these so-called chartists --
who pour over price patterns, momentum indicators and esoteric
formulas for Elliott Wave and Fibonacci targets -- are so
cautious about the Round Rock, Texas-based company.
The stock had been trading in a range, roughly between
$35-$36 and $46, and it has broken below the bottom of those
parameters. Some analysts take the difference between the top
and bottom of the range as a measuring barometer for a downside
target, in this case near $26. Currently, a resistance level is
formed at $35-$36.
And just this week, for the first time in at least a year,
the stock fell below and closed under its 200-day moving
average, a bearish sign that the upside momentum may be cooling
off, the analysts said. That 200-day average today crossed at
$36.56.
"For the short term, you have to respect the trend and
assume it is going lower, but it is a buy zone for intermediate
to long term investors," with support from $34 down to $26,
said Alfred Goldman, chief market strategist at A.G. Edwards &
Sons in St. Louis.
He added, "If I were a trader, I would take a cold shower
and wait until you see a reversal and see if we get up above
the initial problem at $36."
Because the company, founded by 34-year-old chairman and
chief executive Michael Dell, has proven such a successful
American corporation and a boon to investors, some technical
analysts are reluctant to predict further declines.
A sell-off in the stock followed by the sideways trading
this spring occurred after Dell reported fourth-quarter revenue
growth of 38 percent. That is respectable for any company but
fell short of its own historic levels over 50 percent.
In fact, the stock is at a critical juncture.
Jonathan Dodd, technical strategist at Morgan Stanley Dean
Witter, said that the technical signs are deteriorating, but
the stock needs to hold below $35-$36 for confirmation. If it
trades back above that level, the most recent activity may
prove to be only a widening of its trading range.
"While I'm leaning negatively on this, to get a bearish
confirmation you are going to have to see it stay below support
for several days," he said. "If that does happen, then the
target is the upper $20s."
Stock Bull
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