"Confidence
requires decision."
-- Christina Nikolov
Looking For Technical Support
by
Christina Nikolov, Founder ChartWatchCentral
Stock/Ticker: Dell Computer Corp. (DELL)
Date: April 04, 2003
Opinion: Bearish
Current Price: $28.87
Target Price: $27.62, then possibly $26.01 and $23.35
Commentary:
Over the past two months, Dell Computer Corp. (DELL) soared nearly 30%, versus a 9% gain for the NASDAQ Composite. The shares are now challenging a strong zone of resistance between $29 and $31.DELL is a well-run company, so we aren't surprised to see the shares appreciating faster than the overall market and their peer group. Unfortunately, at 29 times projected 2003 earnings, the shares are trading at twice the rate Wall Street expects DELL to grow its bottom line over the next five years. That said, we believe the good news has already been factored into the price. Our research also unearthed several chart-based concerns.
As DELL continued to drift higher over the past month, the shares traced out what can only be described as a rising wedge. The two upward sloped trendlines are clearly visible on the chart, with the upper and lower boundaries currently at $29.76 and $27.78 respectively. (chart #1) To make matters worse, DELL is overbought on a daily and weekly basis. (chart #1, #2 and #3)
Over the past two years, DELL has been trading in a ten point range. Within that range, we determined the most critical support levels to be at $22.00, $23.35, $25.30 and $27.00. Strong overhead resistance resides between $29 and $31.
To profit from this formation, we suggest the August 30 put (Symbol: DLQQF) at $2.10. And if you want to give the trade more time, consider the August 30 put (Symbol: DLQTF) at $3.20..
Chart(s):
#1) Dell Computer Corp. (DELL) Three Month Daily Chart
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Click the Chart for an Enlarged View
#2) Dell Computer Corp. (DELL) Twelve Month Daily Chart
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#3) Dell Computer Corp. (DELL) Twelve Month Weekly Chart
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Click the Chart for an Enlarged View
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