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Technology Stocks : Dell Technologies Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Chuzzlewit who wrote (131090)	6/4/1999 4:15:00 PM
From: D.J.Smyth	Respond to of 176387

a good explanation Chuzz. getting these shorts to let go is like trying to pull a crab from the crab pot. hopefully they'll soon realize that they're the ones actually in the pot. you should write a book with this reasoning. maybe you already have.

To: Chuzzlewit who wrote (131090)	6/4/1999 6:03:00 PM
From: David E. Taylor	Read Replies (1) \| Respond to of 176387

Chuzzlewit: You've been at this investment business a lot longer than I, but I still think this approach has a lot of promise. Keep in mind that I'm not talking about predicting a stock price way in the future, just the short term movement (direction and magnitude) based on a bunch of current market parameters, both general and stock specific. For example, when I ran the integration of my current DELL model the evening of the earnings, it was predicting an opening of 42 +/- 1 for the following morning, with the most important input variables being investor sentiment and analyst upgrades/downgrades. I didn't have the latter, but the DELL thread response to the earnings gave me the former. Re-running the model the following morning after including Niles & Co.'s "low 30's" recommendations with a reasonable weight gave me a prediction of 38 +/- 2 three trading days out, and 36 +/- 5 seven days out. The +/- here are the 95% confidence intervals on the mean prediction, and are highly dependent both on the input parameter variations I assume and how far in the future I run the integration. Now you may think these predictions are not much use, and that either conventional TA or just commonsense is just as good, but this certainly helped convince me to lighten up on DELL at the 5/20 opening. If I was wrong, the upside prediction indicated that DELL would stay around 40 and I'd be able to get back in with only the commission costs. Worst case prediction was that DELL would be in the low 30's as Niles & Co. were spouting. Why did I only unload only 2/3rds of my DELL holding on the morning of 5/20?? Good question! As my broker said yesterday, "you're emotionally attached to the stock", and he was right. I haven't been "sans DELL' since I started running my own investments 3 years ago, and I guess I just couldn't part with it all, figuring that it might not drop below my 38-39 cost basis. Am I fooling myself and wasting my time working on this kind of approach? Maybe, but it seems to me it has at least as much promise as conventional TA, and maybe more, since it allows me to run "what-if" scenarios and generate quantitative predictions of the possible effects of various market events, something that conventional TA of chart patterns can't do. Finally, it uses a mathematical approach that I've used throughout my engineering career to model the behavior of complex systems, so I enjoy the challenge of putting that know-how to work in a completely new field. I look at this like weather prediction, which uses the same basic modelling approach, the difference being that the weather prediction models are based on proven scientific principles of fluid flow etc, whereas my admittedly simple stock price model is pretty arbitrary and is based on my personal understanding of the factors which affect a particular stock. Nonetheless, short term weather prediction is pretty accurate, while longer term prediction is more uncertain. On the earnings model I disagree with you, at least in the case of DELL. The quarterly IDC and Dataquest PC shipment reports come out before DELL's quarterly report, and are enormously helpful in pinning down 2/3rds of DELL's sales for the quarter. These reports, plus tracking DELL's ASP's, margins, and market share growth in the four market segments has proven to be a pretty accurate approach to predicting earnings. Well, that was a much more long winded reply than I intended, so I guess I'll shut up and get on with the weekend. At least my other major holding (AOL) perked up at the end of the day after the Portland case decision! David T.