Don’t Fight The Trend
Yesterday (8/21/01)
after the close, AOL Time Warner (AOL)
confirmed its plan to eliminate 1700 jobs. Also, many analysts expressed their
doubts about AOL’s ability to reach its 2001 financial targets. As you can see
below, the daily chart of AOL clearly reflects its financial troubles. The stock
is trading below both the 20- and 50-day moving averages, and it is in a
pullback from the August 15 low. Obviously, traders are looking to short the
stock as soon as it trades below yesterday’s low.
AOL whipsawed the first 15 minutes
after the open, as you can see on its five-minute chart. I’m sure many
protective stop orders placed by short-sellers were triggered, and they were hit
with minor losses. AOL tried to rally, but it only created a nice pullback play
for short-sellers. At 10:05 a.m. a sell signal was issued. By 10:25 a.m., the
stock was trading nearly 1.30 points lower at 38.58.The second short-selling
opportunity came around 12:30 p.m. when the stock failed to break above
yesterday’s low.
Don’t fight the trend, especially
when both the daily and intraday trend are in sync.