Recently our thinking underwent some changes. We were extremely sceptical of all long positions because it is clear to us that the market bear trend has not yet been ended by the start of a bull trend. On cogitation we found some new attitudes. Indeed there may be more downside ahead. And, an enormous amount of risk has been squeezed from the markets as evidenced by low prices. Also it suddenly occurred to us — hey! we’re technicians. We don’t go in and take a long position and wind up owning Enron. We sell Enron when it reverses trend. With this in mind and in an adventuresome mood we can buy some well chosen stocks (with one unit of three to five units), set stops and see how they behave. If they’re nice maybe we give them some more capital by putting on more units. With that attitude in mind we looked at a bunch of stocks and in general never saw a less inspiring group of stocks. What we mainly saw was the aftermath of carnage, and consolidation or continuation patterns. We looked at T. It seems like if anything survives this Armageddon T will.
We would put a stop 3% under the November low, and would buy some on a scale down, and punt the whole thing if it took out that stop. Dividend is decent and the trend line is broken, but we don’t put much credence in that. Too soon to depend on a bull trend. This is a contrarian play.