"The
ultimate journey is the one which has not begun."
-- Christina Nikolov
Brand Loyalty
by
Christina Nikolov, Founder ChartWatchCentral
Stock/Ticker: Dell Computer (DELL)
Date: February 21, 2003
Opinion: Bearish
Current Price: $26.82
Target Price: $23.25
Commentary:
On February 13th, shares of Dell Computer (DELL) successfully tested support near $22.80. Then over the next five trading sessions, DELL surged 18% after posting its best-ever quarterly product shipments, revenue and operating profit in the period ended January 31st. (chart #1)Despite rough economic conditions, things are looking pretty good for this computer maker. Earnings soared 23% in 2002 and are currently projected to soar 24% in 2003 and 18% in 2004. Financing for this growth is partially due to an expansion into new product areas, such as servers. And if that isn't enough, DELL has also been stealing considerable market share from its competition.
DELL is approaching potential overhead resistance at a three-month downtrend, which currently resides at $27.38. On March 4th the downtrend will be perched at $27.00. (chart #2) Meanwhile, the stochastic oscillator is overbought on a daily basis.
At this time, we see no chart patterns pointing to an immediate decline, which means the shares could potentially drift a bit higher before finally peaking. And if the downtrend mentioned above is surmounted, we see additional resistance at $28.50, $29.00, $30.50 and $31.00. Since any of these levels could cap the shares, we suggest using rallies to initiate short positions, with a downside target to $23.25. (chart #1)
Considering that it could be a while before DELL revisits its recent lows, we suggest options with an expiration no less that three months out. Specifically, we like the May 30 put (Symbol: DLQQF) and the August 30 put (Symbol: DLQTF), which are currently offered at $3.90 and $4.60 respectively.
Chart(s):
1) Dell Computer (DELL) Four Month Daily Chart
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Click the Chart for an Enlarged View
2) Dell Computer (DELL) One Month Daily Chart
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Click the Chart for an Enlarged View
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