Real Money Charts (April 11, 2008)
Today we’ll look at some reader requests: MSFT, INTC, GS, T, BEAV and MEE.
The Micros-ahoo Saga continues, as MSFT waits patiently for Yahoo to wear itself out trying to create additional value for its shareholders (an effort that begs the question, “What took you guys so long?”). But despite the twists and turns of the plot, the story line is pretty consistent when it comes to the price action. Each move up to around $29.50 flushes out a bunch of buyers. That persistent supply needs to be soaked up before the stock will start trending higher. So I’d be patient and wait for the move before buying — you won’t sacrifice that much in cost basis…and you might save yourself a lot of time.
I’ve highlighted two alternative entries in this daily chart of INTC. First, a breakout above resistance would be my buy trigger, with a stop back below the 50-day moving average. But the better entry would be on a pullback to test the 50-day moving average. That’s about 5% lower than current levels, and a pullback to $21 creates a low-risk trade because the stop would be so close to the entry point.
GS is yet another stock that’s testing resistance. It might be enticing to buy GS at $170 and anticipate a breakout above $180. But consider the alternative — a buy at $170 and then a $30 drop before you’d even be able to begin asking whether the March low will hold. I’d wait for the breakout before buying. Would I short? Nah! I hate the financials and would rather spend time picking my own bottom than trying to pick a bottom in this group. But if you like Goldman, try waiting just a bit.
Back in the latter half of 2007, T printed two peaks at $42 and two troughs at $36. But January took out the established support level, and now the bulls are having trouble reaching the established resistance level. That makes it increasingly likely that the current congestion will turn out being a top. If the stock falls back below $36 without first printing a new high, I’d sell the stock and move on.
Back in February, BEAV failed at the 50-day moving average. But now the stock is finding buyers at that same key moving average. Even if the current “flag pattern” resolves to the upside, that puts it just $2.50 below established resistance…and about $2.50 above the logical level for placing a protective stop. That’s not the kind of risk:reward that gets my attention. At this point, I’d just pass on the trade.
MEE has been a monster stock over the past several months. But notice how last week’s move occurred on inordinately heavy volume. Could that indicate a blow-off top, where the buyers finally exhaust themselves in a flurry of buying? Could be, but the stock really hasn’t given much back. Instead, it seems to be rolling over a bit. I’d keep an eye on this one. If the stock falls back to around $42.50 and firms up, it might present a compelling long. For now, it’s just too extended.
Be careful out there.
Real Money