Forum Archive Index - September 2002

[Phaedrus <Phaedrus@techemail.com>]

Jared,
       A while back you asked for my technical opinion on MHI. 

LONG-TERM. This stock has been in a steady long-term uptrend for about 7 years, 
rising from $1 to over $5.25 in that time. In addition, it has a good dividend 
yield. Combine this with the good fundamentals, and you have an excellent stock 
to buy and hold. Long-term, this remains a strong Hold, with price action well 
above the trendline. There are many methods of timing entries into stocks such 
as this. One is to buy (or add to your holdings) whenever prices touch or move 
below a suitable moving average - such as the 200 day EMA as shown. Another 
method is to buy on any short-term oscillator buy signal. Just because this is 
a good stock does not mean that you should be happy to buy at peaks.

MEDIUM-TERM. Stocks such as this that trend reasonably steadily over the long 
term, do not make good candidates for medium-term or short-term trading. It is 
difficult to beat simply buying and holding them. Nevertheless, for most of 
1999 and 2000, MHI was in a trading range, going nowhere. A medium-term trend 
trader, using a slower oscillator such as the Williams'%R would have been out 
most of this time, buying back in at the end of July, 2002. Such a trader would 
perhaps be looking to exit the trade when the W%R drops below the Overbought 
level of -20, triggering a sell signal.

SHORT-TERM. The best short-term "indicator" would probably be candlestick 
patterns. MHI is quite lightly traded, often with less than 10,000 shares 
changing hands in an entire day - occasionally none at all. Because of this, 
candlesticks are unreliable, giving many "Four-price Doji" where the Open, 
Close, High and Low prices are all the same. Low volumes also translate into a 
wide Bid/Ask spread. These factors mean that MHI is not an ideal short-term 
trading stock. A suitable indicator for short-term trading is the Stochastic 
Momentum Index. A trader using this indicator would have sold on 30/8/02. 
Buy/Sell signals from this indicator are plotted on the short-term chart. 
(lower Right)

                     Phaedrus.


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