The Chart du Jour

A Trading Sale: IRF
& Getting Flat Nasdaq

May 4, 2001

By, Barclay T. Leib


Chart constructed using Advanced GET End-of-Day

I had a strange childhood. My father taught me backgammon at age 4; I played in my first professional tournament at age 10; and made it to the quarter finals of the World Championship at age 14. I also bet on football and the horses. Sunday school was always quickly followed by a trip to Yankee Stadium to watch the New York Giants in action.

Somehow by the age 14, and despite the dismal showing of the Giants in those years, I was able to amass a bank account of $11,000 that I promptly decided to invest in two stocks: Allis Chalmers, because I liked their toy tractors that a member of their board had given me; and International Rectifier (IRF) because I read somewhere (likely the New York Times, but maybe an early book by Ira Cobleigh on stock picking) that semiconductors were going to be a great growth business. The year was circa 1972.

Well, Allis Chalmers went nowhere for years, and eventually fell into bankruptcy, and surprising as it may sound now, IRF went nowhere either for ever so long. I must have watched that stock trade near $13 for the better part of half a decade. Overall, my $11,000 foray into the stock market dribbled lower to $7,000 when, if my memory serves me correctly, I bought a few call options on IRF that also promptly died on the vine. Eventually the stocks got liquidated, and the balance of the funds went back in the bank. Betting on football and handicapping the horses held far more appeal than my first foray into Wall Street.

Maybe you are what your first experiences make you, and hence today I'm a better seller of stocks than a buyer, a better trader than an investor.

So it is that I turn to today's picture of IRF, and suggest: sell this puppy, at least for a short term trade. Earlier this year, it made a clearly impulsive move lower that has been followed by a huge A-B-C corrective bounce. The whole semiconductor business remains a mess, and yet people seem compelled to own stocks like this sporting a $3.5 billion market cap at 21 times earnings.

Indeed, we'll officially move to the sidelines today on our entire trading foray into the NASDAQ 100 that we took down at 1459 on April 4th. Our technical targets have not yet been reached, but an ever-skeptical bear at heart, we'd hate to overstay a party we basically have a hard time believing in. Given the current technical complexion of the market, watching the price action for a week or so shouldn't do much harm.

Eventually, if we get some backing and filling that looks constructive, maybe we'll jump in again for a second leg up. Or it is possible we'll spot something else pointing more towards a trap door that will shatter Wall Street's current complacency. Maybe a sudden drop in IRF or the overall SOX index could actually be that trigger.

Subscribers: a new monthly article entitled "Expert Short Picks" shall be forthcoming by Sunday. Renewal notices for those that we have let slide for a bit shall be going out shortly in front of its release.


Non-subscribers are invited to sign up for a quarterly subscription below. Sand Spring's latest subscriber-only article "Four Themes for 2001 and Beyond," as well as our prior February 20th article "Measuring Financial Time: The Magic of Pi," will both be accessible on the final page of the order process. A user-id and password for web access to all past and future articles will then follow by e-mail.

It may also be of interest to some that because so much time (and thus timeliness) has now transpired, we recently released three of our 2000 subscriber-only articles. These now appear under the public Earlier Articles section of the website. Perusing through them may give one a sense of the added premium level of analysis we provide to subscribers.


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