Hot Stock In A Hot Group. But I Think It’s Going Down Here

  • January 19, 2005
  • Derrick Hobbs

I’m
always so “long/short” correct in the wording of my columns. You
know… “if the stock goes up, do this” …  “if it goes down…do that”. Not
tonight baby! Tonight we dance! Hobbsy got his groove on and the groove is good!

I’m exposing true “opinion”
tonight. I’m also proving to you that no matter how methodical and mechanical
you are in your analysis and trading…technical analysis can lead to an opinion
about markets. So be sure to tame that crazy animal with smart money management.

Anyway (as I stretch back,
crack my knuckles, and roll my neck to and fro, with a deep sigh) …. I don’t
like Ryland (RYL). It’s the one stock that is screaming “sell” based on
my analysis. It’s screaming this on the weekly and daily time frames. My ears
hurt this thing is yelling so stinking loud. Now that you know how I feel, let’s
give you some support to my outlandish claims.

First let us review the weekly
chart below. What you will find is that we’ve completed a 5 wave pattern that
began in 2000 and is now over in 2005. Not only are the waves very clean, but
the stock is extended beyond the top of its regression channel. Folks….this
stock would still have its uptrend in place if it sold off down to $40! Forty
friggin’ dollars! For you math majors that’s a 35% potential sell off from
today’s close. Sure, sure, the stock could keep going up but I can not paint a
scenario in my wee little mind that gets this thing above 70 for any length of
time. The potential is just not there for me on the upside at today’s levels.

 

 

Now, let’s shift to the daily
chart to see if we have confirmation at the lower time frame. Sure enough, this
time frame has also completed its own 5 wave series from July 20, 2004 to today.
Today we saw RYL leave this long tailing candlestick against a large Fibonacci
price resistance zone and on large volume (3x normal). Let’s also not forget
that the stock has extended past this time frame regression channel as well. The
thing is “fat” right now. I’m guessing it needs a New Year’s resolution to trim
down a bit. (I know I do!)

 

 

If I haven’t made myself clear,
the stock is a “sell” on the weekly time frame. The stock is a “sell” on the
daily time frame.  I’m looking to see $40 to $45 before I would ever see $75 to
$80.  Of course that’s just some guy in Indiana looking at screens all day that
has just developed an opinion…and opinions sure can be deadly!

So you want to buy it right
here? I’m guessing there will be plenty of supply out there and you’ll find that
you get a great fill if you want to buy (hee hee!) As for me…NOT!

dh