Thursday, 1 November 2007

DELL in a CHINA syndrome

Everyone is so amazed with the performance of Apple's (Nasdaq:AAPL) stock movement that other similar issues are overshadowed. Like this one...

Dell Computers (Nasdaq:DELL) was initially pointed out by Tidus as having a symmetrical triangle. The triangle is there but the volume looked wrong. But something told me there was more to it than just the triangle. So I decided to zoom out to see what else was happening here.

Since July 2006, DELL has been inside an upward channel. The resistance has been breached twice but the price returned back into the channel both times. The action last night was different. The triangle that was pointed out seems to be a setup for a break of the channel. Last night's trading gave us a significant increase in volume.

Could this be the start of a new trend? It's very possible. But let's also take a look at a similar chart that has already gone through this phase before.

CDC Corp. (Nasdaq:CHINA) has gone through the same thing before. As seen on its chart, it has already completed the cup and is now waiting for a set up for its handle.

So what do we play? It all depends on what you like...

If we play DELL, we're just playing either the triangle setup or the channel itself. If it was the triangle that you were looking at, the proper buy for it was around 29.87, with the target at 33.82. Cut loss would be at 27.73 but this improves with every day that passes. If you want to play the channel, the proper buy would probably be at 30.81 and the target would be at 36.28. Cut loss should be done once it enters back into the channel.

As for CHINA, definitely the play is the cup with handle. If we were to base our breakout from the handle, as of this writing, the resistance is at 9.19, giving us a proper buy at 9.38, with a target of 18.19. Yes you read it right, that's a 98% potential return. But of course, this may take some 2 years.

So many choices, too little time to's your call.

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