Time To Be Illogical

Cirrus Logic
(CRUS)
can teach us how important
it is to be flexible when we trade. As you
can see on its daily chart below, CRUS closed just above its support level
yesterday (6/26/01). The stock is also trading below its 50-day moving average,
and it has a short-term declining trendline. According to the TradingMarket’s.com
Stock Scanner
, CRUS carries a 3-month RS reading of only 14. It sounds like
a good short candidate.


This morning before the open, Thomas Weisel increased a rating of CRUS from buy
to strong buy with a target price of 45. This really ignited the stock, in spite
of an important pending announcement from the Fed later in the afternoon. At
9:50 a.m., the issue made a strong breakout above its 50-day moving average with
heavy volume. Shortly before 1 p.m., CRUS staged the second breakout above a Slim
Jim.


Don’t resist the momentum. Sometimes,
it pays not to be so logical.

Until tomorrow,

Eddie