Charts Reflect the Future

Buy the rumor, sell the fact. It's a strategy that commonly confuses the novice trader, but it makes sense. Selling pressure often develops after earnings or news events. The key to the move is whether the news was anticipated.

Monday the "sell the fact" strategy happened in the biotech sector, specifically to Celera Genomics. Traders had anticipated today's completion of the Human Genome mapping project and last week, bought the stock in advance of the announcement. When the news came out, that was the signal to sell. Why did that happen? The news was priced in with last week's gains.

So Tuesday and Wednesday we have the FOMC meeting. Most everyone expects the FED to leave rates unchanged. Following the "buy the rumor, sell the fact" strategy you would short the market if the FED announces no increase in rates, right? Well, not necessarily. We've had two days to sell off in advance, setting the stage for a possible rally on the news. This is one of those times when it may be better to wait and see how the market digests the news before placing your bets.

Ok, let's move to the charts. Keep those questions coming. We're looking for technical analysis questions, stocks that you would like to see diagrammed, or comments on this feature. Send your email to: traders@splittrader.com

Could you please diagram the chart of JDSU? Its support and resistance points? Thank you all for all your great work.
Terry

You bet! JDSU's merger with ETEK received the go-ahead from the Department of Justice Friday, but the companies were required to cancel some contracts for thin-film filters. That decreased some of the company's market share, but it hasn't hurt the stock much.

Technically, JDSU bumped up against an overhead resistance area last week and is consolidating recent gains:

Suggest you look into TNL and TLGD as split candidates. Both have low float and have performed remarkably well.
Regards

Both stocks have appeared on our split candidate list for about a month. TNL last split in 2/97 while trading at $45, TLGD last split in March at $118. With earnings season approaching, we may see increased interest in both stocks.

How can you locate all of the companies in a given sector in a listing with company names and symbols? When you are bullish on semiconductors, for instance, where can I go to pull up a complete listing of all the companies that belong to that sector? The sectors I refer to are the ones in your "Sector Watch" listing. I found some on the Nasdaq home site (Biotechnology, Telecommunications, and Computers, but did not see them all by far (semis and networking for instance were not there). I did not find anything on CNBC. I sure hope you can help me because this is a very important resource to have. Thanks.
Larry

When you are at the Sector Watch page, note that the index symbols are links. If you click on them, it will take you to another page, which lists the stocks that make up the index.

In the past you have done split plays on the satellite TV companies (DISH, GMH). Yesterday (6/19), DISH was up 15.5% on an analyst upgrade. Keep in mind that GMH has about 3 times as many subscribers, more revenue, and half the market cap of DISH. This all coupled with the fact that GMH is 40% off its highs, and it splits 3-1 in 10 days. In the past both of these companies have exhibited incredible split runs leading into split week and the week after the split. At any rate, I am just curious why haven't you guys picked up GMH as a play yet? If the market remains bullish it seems like the cream of the crop right now.

You would think so, with the 3:1 split payable this Friday, 6/30. But there seems to be a lack of interest for this split. Maybe it will pick up, but even last Thursday's favorable mention by Merrill Lynch didn't have more than a one-day effect. The company recently reported 3 consecutive months of declining subscriber rates. It could be that the crowd is waiting to see their next earnings report, which comes in mid-July.

That's it for this week - Good Luck!
Steve Pekarek

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