The Chart du Jour

Motorola: Into Support

October 11, 2000

By, Barclay T. Leib

A few days ago we got an e-mail from a reader all hot to sell short a variety of different stocks. One of them included Motorola, a stock we have not recently commented on in these pages.

For that investor and others, we want to start offering a bit of caution. The meltdown in telecom may not be quite over, but it's getting pretty late in the game to establish new shorts right here. Note on the monthly chart below of Motorola, that we are now in the range of a 61.8% retracement of the entire 1990-2000 upmove in Motorola. Short term overshoots to the downside are likely, but overall, the $22-$26 region is NOT a high probability point to add or establish shorts -- not in Motorola at least.

Chart produced using Advanced GET End-of-Day

Unlike so many companies out there, Motorola and Lucent are at least real companies with real earnings. No, they are not going to grow at the previously perceived 25% a year, but no, they are not going to go away or collapse. At this point in the game, we'd be more worried about all the other companies out there that still sport several billion dollar capitalizations, have tons of broken convertible debt outstanding, but may or may not survive to service this debt longer term. We'd also be worried about the financial repercussions of the people who own all this junk-like paper -- i.e. the financial sector.

For further thoughts on this subject, we direct subscribers to re-read our September article "Where the Excess Lies."

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