May I give you my take on RAX?
This looks very nice, indeed. For those who follow charts, RAX is in a very nice "cup w/o handle" pattern. If you're unfamiliar with the pattern, buy a copy of O'Neil's book, "How To Make Money In Stocks" or go to your local library. All of the best libraries have it.
Now, look at the weekly chart and you can really see the nice forming of the cup; it began on 1-22-10. Can you see the rounding of the cup "bottom" around June? Notice the symmetrical upside into the R/H side of the cup? See the volume breakout the week ending October 1st? That's telling you that institution are in there buying.
Weekly average shares traded is around 12.5 million; the week ending October 1st volume ballooned to 33.5 million. RAX also held on to most of its price gain...a very good indication. There is one thing which is a concern...
See that high volume gap down on October 6th? That 11% gap may need to be "filled" with a "handle" of some sort. In most cases, that R/H part of the cup [should] continue higher before a pull back, but it can still be successful, as long as it corrects no more than 15%; RAX sold off 15.58% the week ending October 8th.
Ideally, you'd like to see RAX form this short "handle" on bone-dry volume. Were it to make a mad dash, up on low volume OR down on higher volume, it could spell doom for any rally. This is one place where uniformity is essential. A "wedge" upward may be premature and just ultimately turn into a head fake.
Best case scenario? Should RAX unfold as it should, the ideal buy point would be $26.60. Don't jump the gun, thinking that you know more than the general market! Any premature buying, before the above price target, could be very harmful to your investment portfolio.
If RAX breaks out at that point, it must be with HIGHER than normal volume and price appreciation; both above 40%. More is better. If it does not, or breaks out to new highs, stalls during the day and gives back much or all of its gains for the day, you're better off selling out with a small gain or loss.
Holding on is a fools game. "RAX is a great company. I know it will come back tomorrow...I know it." If you "know it", then you don't need to read this post.
Could I be wrong? Of course, but 20+ years of doing this has helped me form a stock buying philosophy that seldom failed me in all that time.
VOLUME is the key; symmetry is the door which it opens to higher stock price gains.
Hope you have found this of some help.
The after hours trading on Friday was mostly around the close of 22.86. Then the following occurred:
6:19 200 shares @ 23.71
7:37 320 shares @ 23.65
7:37 400 shares @ 23.65
I know of no news to account for these higher-priced trades. Since the volume of the latter trades was not very large, I would tend to believe they are simply aberrations, and we will never find out why.
just finished Chart Your way to Profits , Tim Knight , onto Irrational Exuberance , Robert J. Schiller , read Mr. O'Neils , all three are within arms reach , combibe the first two mentioned , click click
"...his view is that the chart is inconclusive."
ALL CHARTS are, by nature inconclusive. Anything can happen anywhere along the way to make a chart fail.
Based on current evidence and past history, this is how charts look as they unfold. This is what puts a stock on the radar screen.
Gotta go, but I'll be back.
P.S. I grew up in the West Ward, right near West Side Park.
Thank you for the reading list. I will definitely pursue.
I actually emailed stockcharts.com to see if they would write a story on possible cup and handle formations in progress. Of course, I asked if they could identify RAX as one such stock. They replied, saying my request was forwarded to the research team for a potential story, so we shall see.
I also spoke to my broker's technical analyst re Rax's cup and handle, and his view is that the chart is inconclusive.
Finally, Newark? When did you grow up there? Your profile says you are 98, but somehow I don't believe it. My guess is more like 68.
Thank you, again, for your help.
Best - FF
Do you like to read? Of course you do! Reading, assimilating and implementing what you've learned is essential when investing in anything.
Here are some [by no means all] of my favorite reads on this subject; in no particular order they are:
How To Make Money in Stocks, by William J. O'Neil
How To Buy Stocks, by Louis Engel
The Battle For Investment Survival, by Gerald M. Loeb
Market Wizards, by Jack Schwager
"Finally, so many one-line messages - some of which scream in capital letters - drive me a bit crazy."
Treat them as you would a recalcitrant infant begging for attention.
It's great that you have found Chip's "Stockcharts.com" website. He is a wonderful individual for creating his website and offering many things on it to anyone who cares to utilize them for f-r-e-e! It's a great resource!
Volume? Read O'Neil's book. Use the www.investors.com" website. It is the one resource that I utilize every day, aside from "The Paper", I.B.D.
If I can help you in any way, just post; I'll be around...
P.S. I was born in Newark. It was a great town to be a kid in. I owe it a lot...
Opa....just wondering as it relates to your chart reading and the negative 15% on October 8th week ending. As this was precipitated by Equinix slight shortfall in revenue annoucement on October 6th. Which then caused a hit on several cloud computing or RAX type companies. Does an exterior causing event like this carry the same weight as if RAX themselves announced a revenue shortfall, etc? One wonders if the price would not be around $26 or higher had this not sent jitters throughout this group of stocks. Your thoughts? Thank you. Lu
"Does an exterior causing event like this carry the same weight as if RAX themselves announced a revenue shortfall, etc"."
Forgot to address this part of your question...
From a purely technical standpoint, it makes little difference what caused the "gap", or abrupt retracement to the downside. The fact remains that the gap is there and needs to be filled in some way.
Sometimes, it's a long process of "backing and filling". Other times it can be filled with an immediate snap back the day after the occurrence. The prospects of this "handle" forming in the next few weeks look very promising. Volume here has dried up nicely, as it should. Hopefully, volume will begin to pick up as the right side of the handle begins to form and move upward.
Good to hear from you once again!
"Does an exterior causing event like this carry the same weight as if RAX themselves announced a revenue shortfall, etc? One wonders if the price would not be around $26 or higher had this not sent jitters throughout this group of stocks. Your thoughts? Thank you."
That's a tough question to answer, Lu.
I look at the fundamentals and can see no visible signs of deterioration in RAX there. Things look very good from that standpoint. On the technical side, 6% more funds own RAX this past quarter than the previous; this is significant when you consider that the prior two quarters shares were going nowhere.
So, to answer your question, I would tend to agree with your summation about where RAX could have been, had it not gotten painted with the same brush as Equinix et.al.
I've read where about 15% of RAX income is derived from "the cloud". So the question begs, why is RAX considered a "cloud company", when the remaining 85% comes from hosting? The answer to this remains a mystery; no one can agree!
Lastly Lu, I'd suggest that you look at a "weekly" chart closely. There you will see, what could very well be, the bottom of a nicely forming "handle" on the "cup".
I reiterate from a previous post, should this follow through as it should, this could be a runner. The handle will fill in that "gap" from October 6th. The breakout volume will be something to watch closely. There have been some head fakes and disappointments in this area for RAX.
The handle has at least another two or three weeks [or more] to form. Were it to go straight up from here, I would be hesitant to buy. That action is for those much more aggressive that I.
Hope this post has answered your question!
All The Best,
There's plenty of support right at $20, going all the way back to February! Look at a chart and find the following...
You'll notice that RAX touched and then bounced off the 50 day; someone was in there buying, don't you think? There is scant support at $22.50; may hold there...maybe not. Twenty should provide very firm support if RAX does indeed slip that far, baring anything unforeseen cataclysm.
Lastly, you'll notice that today's action, although a 6% swing, was on almost 17% LESS daily average volume. No, this is just part of a wonderful shake-out pattern, designed to rid a stock of those with lesser convictions or those taking profits. Nothing more.
Should RAX begin basing at any of the points mentioned above, you might want to buy a little bit after a week or two. If it continues to rise on higher volume, 5% above what you just bought, buy some more...then stop.
However, it's got to begin to settle down [read "basing pattern"] before I'd put any of my hard earned money into it.
Watch the volume...that is the key.
Hope this too was helpful.