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Tuesday, January 29, 2008 

Technically Bearish but I’m not yet well convinced

Stock markets have been in full retreat this year, with the major indexes down more than 10 percent in January. Many people have being talking on the floors of a possible strong Bear Market ahead, but I’m not yet convinced about that. Honestly speaking I think we’ve started correction more conservative than was before, after recent years of gains and due to some worries related with the credit crunch, but in just one month we have lost all gains of 2007 and 2006, extremely exaggerated and a rebound from the current levels is now very likely. Over the last years of nice and strong gains in some markets, investors have been driven by greed, but we're now seeing investors being driven by many risks on their minds associated to fears of US recession, and that can make them irrational, like we saw last week. Technically we’re in a Bear Market in some Indices, no doubt about that, but it seems too early to decide to put all my money on the short side, I have many doubts to be clarified before increase my position. We’re seeing a strong intervention by FED in the last days to stop a possible recession, and the aggressive interest-rate cuts by the Federal Reserve could help to stabilize the economy and support the stressed banking sector. In addition the a $145 billion tax-stimulus plan offered by President Bush late last week. The subprime crisis has led to a credit crunch in the United States and the possibility of a recession in the U.S. which could affect the entire world. It is important to keep an eye on what is happening in America and analyze carefully all macro economic reports. So, the message that I try to pass through, is to hold your nerve and to take the opportunities that will certainly arise on bad days to pick up shares standing on far better ratings than have been available for some time, there are now many cases like that in the stock market. Don't be hasty, the opportunities are happening.

Chart courtesy of stockcharts

RF Micro Devices shares caught my attention since the last sell-off occurred early in this month. Stock is currently 50% cheaper compared to December prices, trading with a PE of 6, very low for a technology company. Current prices are very attractive and I’m currently increasing a position in this stock at these levels, without fear, anything becomes possible when stocks reach these levels of oversold. Honestly speaking, chart is printing a weakness picture for a possible fast rebound, but the $4.30 level should be my target for the next month, depending of course of the earnings report that will be out on 31st of January. The main reason to have entered long in this stock was Nokia results which are one of the most important customers of RFMD. So, if you like this company and are accompanying its model business, be patience because a turnaround in share price should occur soon.

Chart courtesy of stockcharts

FSLR - Broke symmetrical triangle on volume. Looking for the confirmation tommorrow.

Chart courtesy of stockcharts

Early this month CNXT made a bottom around $0.56. The stock retested this level a few days ago, which leaves a double bottom pattern on the chart above. The MACD is showing a positive divergence, after which the MACD made a bullish crossover. Both the RSI and the Stochastics are now rising out of the oversold levels. So, keep an eye on CNXT for a possible breakout over its resistance at $0.68 ( 20 dma ).

Disclaimer : Trading stocks involves risk, this information should not be viewed as trading recommendations.The charts provided here are not meant for investment purposes and only serve as technical examples.

That's All. Have a great evening !!!

AC

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  • I'm a 44 year old Independent Trader using proprietary technical analysis with more than 20 years experience of investing in the US stock markets. I started this blog in 2006 simply as a way to share my thoughts about capital, risk management, and trading. My blog contains only my personal opinion and is provided for informational purposes only.

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