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Update on some of the stocks we follow

May 5th, 2009 · No Comments

Some gravity defying stuff here..

Our new series trading ideas didn’t get off to a good start. But we have to say, it’s some time ago since we saw a beast like this:

That’s 10 days of going up in a row, and that after it was in overbought territory already. This just cannot last. Could it possibly squeeze out another up-day tomorrow? Who knows, but it’s a bit like throwing a coin and getting 10 heads consecutively.

One knows that these events are serially unrelated, but that doesn’t stop sheer common sense to bet against heads coming up for an 11th time.

The point is, this rather unusual graph has consequences for other stocks we follow. Normally, we would say that they are getting a bit overbought, but that’s what we would have said on April 21 about DineEquity, which then set off to double again in a mere ten trading days..

You see. Here is the dilemma. Take Fuqi International. If you look at the chart, normally we would be saying that it is getting ahead of itself a little:

And since we’ve been advising you to buy at $5.2 a couple of weeks ago, we would also say that this is quite a result. However, we now see that it should not necessarily be a pause just for technical reasons, and we have to stress that we like the fundamentals of Fuqi much more than those of DineEquity, as would have become instantly clear to anyone reading our writeups of the two companies.

We think that Fuqi, even after the 40% rise or so when we recommended it, is still very cheap. And the same holds for InterOil:

Although this is not nearly as overbought as FUQI, let alone DIN. And we just had Wayne saying it would be worth up to $200 after all the deals are done (and we had some rather generous exercises ourselves, last year). You won’t get any sell advice from us here…

Tags: FUQI · IOC · Technical Trading Ideas