3SOF

Quote from: Lucas Scott on March 10, 2006, 05:23:46 PM
I was more fascinated by the HGSI chart. That was a crushing gap down

If we don't learn anything else from this experience, it might be well worth it if we only learn not to get in the way of a "crushing" gap down like this.  Luke's description is a very good one.

We've all heard the expression, "Don't try to catch a falling knife" when a stock is tanking, but looking at this candlevolume chart (the width expresses volume), buying into the powerful move down looks more to me like trying to catch a piano that just was thrown off the top of a building.

Crushing.

I think that if we resolve never again to try to catch that piano, we've already profited from this experience.  At least let's wait for the piano to bounce off the sidewalk a few times (some level of support). 

At the last significant top in DIET, in February, 2004, the stock dropped 77.5%, and it took five months to bottom.

That in no way means that we're facing the same thing here, but it's certainly an indication that DIET could have some more downside, and that this could take some time to settle down. 

We know from the first chart that I posted this morning that the Symmetrical Triangle target of 5.82 wasn't support. 

Sometimes, targets will make, or come close, and that's it.  The stock reverses.  DIET dropped very quickly from the open on Thursday to 5.93, had a bounce, and then dropped right through 5.82 to about the low 5.60's, so 5.82 wasn't support.

Friday afternoon, it looked like the 200DMA at about 5.06 might be support, but that broke,  volume increased again, and if you look at an intraday chart, the 200DMA actually became resistance in the late afternoon, into the close.

Since it generally takes awhile for some kind of bottom to form, let's look at a weekly chart.

After the July, 2004 low, DIET spent the next year and half in a Symmetrical Triangle formation from which it had a false breakout in October, 2005, and then a valid breakout in late December, 2005.

The top of that pattern is one level where we can look for "possible" support, but we can see that DIET already has gone below it.  That doesn't mean DIET can't rally because it did that.

DIET certainly is going to have a reflex rally, and it "could be" as early as this week. When a stock has broken this badly, expect anything.  On a reflex rally here, I would expect "erratic" trading, though, and it isn't anything that I ever would play. 

If DIET does have a strong rally this week, back to Thursday's gap down, personally, if I were long, I would thank the market gawds for giving me that opportunity, and I would sell into it, as fast as I could.

"Sell into rallies to known resistance."

As shawfund, Mike (1reilly) and others have discussed, I'd want to see some kind of double bottom, or some kind of pattern to form, etc.

Back to the weekly chart...

Where I "suspect" (I never try to predict...I stink at it) that the stock might form some kind of bottom in the coming weeks is at the Kumo (Cloud), which is the vertical green lines, and at the bottom of the Big Symmetrical Triangle (solid blue up trendline).  That area currently is at 4.05-4.36.

We'll watch it.

Some kind of bottom there, with the Kumo (Cloud) providing additional support, as it "should," might be very tradeable.

Notice that, after the February, 2004 top, DIET tanked almost without surcease until it reached the bottom of the Kumo (Cloud).  It then rallied only for three weeks, back to the top of the Kumo (Cloud) and it didn't look like much, but it was a rally of about 25%.

Also notice that in both September and November, 2005, when DIET was shaping up nicely for the pattern breakout, the top of the Kumo (Cloud) provided support on both occasions, within a penny or two.

The Kumo is just one thing that can help us out.  The up trendline is another.  Patterns that form, etc. can help us out.

Again, I'm not predicting that DIET will go to (4.05-4.36), but after this week's drubbing, and with this week's candlestick closing near its low on big volume, it doesn't look like we've made a low, so it certainly isn't out of the question. 

Sorry, I posted the wrong chart.  It's been corrected.

When I finish with this post I plan to applaud each one of you who have contributed to this thread in the last 2 days. Somehow we have accumulated a group of very serious investors who are willing to share their opinions and knowledge with each other. The conversation taking place here is worth the price of entire year's subscription. Even we old pros have to be reminded of our basic rules from time to time. Melf said something I think is very important. When you look at this stock both technically and fundamentally before the earnings PR you can make a case for holding thru the report and a case for selling before the PR. What is sobering is the obvious immediate haircut this stock took. I never thought we would see guidance of 200 or 300% growth. Was the street looking for this? When I saw that they beat the numbers for the quarter and only guided 100% growth I thought down but not thru support levels. Now I'm asking myself what kind of PE will the Street put on this stock. It will be interesting to see what the Merriman analyst has to say when he recovers from the stroke he probably had on Thursday. I would kiss this stock goodbye in a second had they missed the quarter and given that CC performance. I just don't own that many stocks that are projecting 100% growth and have just taken a 40% haircut. Melf thanks for all your commentary and TA, you given me something I can work with to form a plan. Luke I promised myself I would not buy this stock on Fri. I stuck to that but I've got a gut feeling you might have a good Monday. Each one of you will now receive applause, it's for your willingness to take the time to be a part of this community.

After thinking about the hit we took on DIET, I believe the fact that they actually beat estimates and guided higher were already priced into the stock prior to ER release. I don't know what else they could have done. They would have had to post totally blow out earnings for Q4 to make the stock run on Thursday.
As far as the analyst from Merriman is concerned, I've learned to never trust these guys again. They are not big players. Their stock sells for just over a buck. I held their stock a couple years back and lost money on it. I held 1000 shares of VCLK and held thru earnings as well and got burnt there too. An analysit from Merriman upgraded that stock after ER was out and VCLK has done nothing but tank since.
My lesson is this, take profits religiously and never ever hold thru earnings. Once in a while your stock could post blow out earnings and you'll miss a nice run, but you will be far ahead to sell before ER and avoid the losses that occur 8 times out of 10.
I had a profit of $600 on VCLK the day before earnings and sold a couple days after that for a $1450 LOSS!!! I lost $5000 on DIET but at least I sold on Thuyrsday and avoided another $1000 in losses had I held on.
As it was, on Friday, even though I was still hurting from my 2 big losses, my mind was clear and I was able to trade other stocks for $1200 in profits. By not having to watch DIET I was able to devote my attention to profitable trades. Hopefully I'll be able to make up my losses in the next week or so.
As long as I held on to DIET and VCLK I was wallowing in the House of Pain, paralyzed from seeing other opportunities. And had I held on longer, my losses would only grow larger.

As someone, who is new and learning, I want to say how very much I appreciate all you traders. That you share your experience and knowledge so willingly is amazing. That David is having difficulty and is pretty honest about it impresses me. I thank you all and have learned so much.

Now back to figuring out how to make money. Luckily, I was out of DIET before it crashed, as I am so nervous about the entire market crashing and am overweighted in precious metals and oil. That was just dumb luck. They all crashed together Thursday.

I am inspired to read all your informative posts on the site.

Thanks again!

Hi Labelladonna,

I echo your sentiment. Some great discussions in this thread! Let me add my 2 cents:

eDiet has always been  a story stock.

Let me first define what I mean by a story stock. This is a stock which has a story behind it which fundamentally can change the company's outlook. We have discussed several story stocks on 3SOF:

EMFP.OB and SVA. If Bird FLU ever mutate to a form that can be transferred from Human to Human these stocks will stand to gain tremendously

NVEC If MRAM will replace existing memory technologies NVEC is going to increase 10 fold if not more

If on the other hand the story dies it is time to reevaluate the stock.

The story behind eDiet is that they will repeat what NTRI already has done with great success. Develop a meal delivery business that would explode revenue and earnings.

With the earnings release that story is put on hold. I deliberately don't say dead because I think the jury is still out.

But for now we have to value eDiet on the fundamentals.

They expect to have a 10% revenue increase and decreased cost. Due to the seasonality of Earnings I would expect Q4 to be the best quarter of the year. But with increased earnings and margins it would be reasonable to expect earnings in the area of 0.28 for 2005 (analysts estimates are 0,27). Now that is the base business case and that would give a PE of around 17. Which is cheap for a company like eDiet.

If we have a look at the long term chart we can see that eDiet has fallen back to the long-term ascending trend line from before the story took it higher. This seems to confirm that the market now valuate the company based on its core business only.



Then you can add the joker of their meal delivery business. I still think they can make this a great business after they have learned the in and outs of the business. It is important to mention that eDiet's business model is fundamentally different from NTRI's as 1reilly has described so excellent in his diary. Just look at the food:

NTRI



eDiet



eDiet has a great management team (even though I am sure there are a few out there that would disagree with me today) and I am confident that they will make this new venture work. In The CC the CEO, Ciaran McCourt said:

QuoteWe officially launched our food service on January 1 and early signs are positive. I want to stress to all that we are in very early stages. We are excited about developing the business on a standalone basis as we work out lifetime values, re-up percentages, and margins. We will start to share more detail after we report our Q1 numbers.

They are shooting the first informercial these days and that could increase customers to this service as well as their site significantly.

Upbeat comments in the Q1 reporting could add some upside to the PPS having in mind that the food delivery business after the recent drop is not fully reflected in the stock price.

The stock market is not very patient but for the patient investor this might still be a great investment.

Mike

I want to say something to you guys. 

My Applause Rating on Friday afternoon before I posted in this folder was 286.  It was at 288 when I signed off yesterday.  It's back to 286 right now. 

PLEASE DO NOT START APPLAUDING ME NOW, like you did the last time I mentioned these ridiculous smites.  Luke (Lucas Scott), at the time, said, "It looks like the squeaky wheel is getting the oil", and I entirely agree with him.  That's equally ridiiculous.

75-100 members already have read my posts in this folder, so I don't want to see my Applause Rating go running up now. Too late, and that isn't my point.

Here's my point:  I experience this same thing any time that I present a case for why a stock isn't bullish, or on one that is acting bearish, or on one that has turned bearish,  etc. and here's what I want to say about that: try to be objective.  Try not to "get religion" about a stock.

Here's what I mean about "getting religion."  When you're long a stock, naturally, you wnat it to go up.  But, if you can't stand to hear anything negative about it, or if you have constantly to quote every piece of anectodal evidence that makes you feel better about your postion, you're headed for trouble, because you're never going to see that "there's a time to hold 'em, and there's a time to fold 'em." 

You simply can't because you've "got religion."

Here's what I mean by "anecdotal evidence."

I called the company today
by: dead_beet_dad
Long-Term Sentiment: Strong Buy    01/25/06 02:13 pm
Msg: 3451 of 3514

and asked them how the Fresh Cuisine program was doing. Exact words" Very good response, better than they thought, and members are telling them the food taste great and much better than what Nutri-system is offering". This was encouraging to me, I really don't know why people are selling this stock but after my contact with the company I plan on being a shareholder. Please call them or email them and they will respond.»"

dead_beet_dad notices that people are selling the stock (he posted three days before DIET topped), but he plans on being a shareholder because the company said "very good response, better than they thought."

Let me ask you something: What else is the company going to say?  Okay, they could have said "something" else, but what I'm really asking is, does anyone think that the company is going to say, "Oh, crap, things aren't going that well."  Or, "Kinda disappointing?"

Frankly, I don't know why these companies saying anything at all because they could have the SEC on their backs if they say anything that materially effects the stock, but hasn't yet been disclosed to everyone.

Part of their job is to "spin."  That's, in part, what they get paid to do. 

"dead__beet___dad," if he bought DIET right near the top, is a strong candidate for "getting religion" and "marrying this stock."  He also likely will try to choke you if ever dare  say anything about DIET (or any other stock that he ownds) that isn't bullish.

"Don't mess with people's 'relgioun'...and don't say nuthin' bad about my baby that I'm married to."

Folks, please try not to become a "dead__beet___dad."  Try to be objective.  Try not to cling to every piece of anectodal evidence that makes you feel better about being under water in a stock. 

If that makes you want to smite me, smite away.  I wasn't talking to you anyway.  I'm talking to the members of this community who are trying to be objective.  The members who are willing to evaluate what they read...looks at the charts...and make their own objective decisions about the stocks that they choose to own, or not to own.

Again, I have no long-term opinion about DIET, or about any other stock.  I'm a trader who, at the moment, is trying to offer help to those of you who currently are in a difficult postion with this particular stock. 

DO NOT RUN MY APPLAUSE RATING UP TO MAKE UP FOR THE SMITES, OR I WILL BE SERIOUSLY PISSED.

Smites are okay.  YOU"RE PISSED, and I really can't blame you at all for being upset.







   
   
   
   

I got so curious, wondering if dead___beet___dad, "got married" and "got religion," I had to go and check.  After checking about six pages of "Messages From Hell," I was ready to get outta there, when I came upon this: 

Re: Congratulations Shorts
by: dead_beet_dad    03/09/06 11:01 am
Msg: 5536 of 6152   
 
"Shorts won, boy was I wrong on this one. I can't believe I could be so wrong about a company. "

I am soo-oo proud of this guy.  Not because of the "shorts won."  In the short-term, yes, but that remains to be seen, longer-term.

I'm proud of him because he's showing objectivity.  He's got a chance of succeeding.  That makes my day.

Good for dead___beet___dad!!! (Applause, even though he doesn't post here).

Hi Melf ELf,

It is not too often we agree so when it happens let's make a point about it.

There is obviously a lot of disappointment about the earnings report from DIET and you could easily see this stock drop further even though I see some support here. I do not presently hold the stock but I would certainly buy the stock if it falls below 4.3.

If the stock tries to close the gap within the coming days I would also take profit or cut my loses. For the time being the story is on hold and the fundamental business case cannot support a price above 7.5 in the short run.

So we have a span between 4.3 and 7.5 where we can make money.

Long term I still believe that the stock has the potential to go well above 7.5 but for now we have to be modest!

Mike

I have highly appreciated the DIET discussion.
THIS exactly makes 3stocksonfire.org so different from all the other stock boards.
You have technical and fundamental analysis fraction working hand in hand together to give the best overview and stock analysis.


Thanks for this great teamwork & happy trading


cheers
Oliver

p.s.: looking forward to the new changes & new ideas from David & Frederick!!

Quote from: Michael on March 12, 2006, 12:14:18 PM
Hi Melf ELf,

It is not too often we agree so when it happens let's make a point about it.

Michael (Mike),

Oh-h, bull crap!

I've thought about the two message that you sent to me today, and here's what I've decided.

If you even "remotely" think that you are going to "prove" anything with your TA vs. FA nonsense, and if you think that you are going to keep playing your games with me, and think that you are going to continue to use me for your own purposes, you've got another thought coming.

I'm talikng, specifically, about this DIET folder and about the, SVA, CKCM, KOMG, STX, VPHM, DHB, just to name a few.

You "claim" to be an "investor" yet you're telling these people who are in "The House of Pain" that you are out of DIET?

Why? 

When?

How in the world is that helping these people, to find that out after the fact , after this stock has tanked?  That you are OUT?  How is it, that you always come off "smelling like a rose?"

"I have a 300% gain in this stock, so it doesn't matter."  Buy more!

If you posted that you were out of DIET before this stock tanked, I will apologize to you IMMEDIATELY.

You said in one of your messages to me today that you smited me for being "arrogant."  I'm okay with that, because I know that there is a very fine line between "arrogance," and "self-confidence."

I'm self-confident, Mike, and I know that I'm nothing more than that, and if you dont see it that way, that's YOUR issue, not mine.   You must not have read  about my LOSSES that I've posted, like the 25% hit I took in October, in HGSI, and the many other losses that I have taken, like David.  All of the other LOSSES that I've posted on these boards.

I've gone through this crap  before on other internet boards, Mike, because I'm an "easy target."  I'm experienced, and that's apparent because of all of the hours that I put into my work, and the hours that I spend  posting my charts, with "why" I am taking the trade.  "Why" this is my stop.  "What" the risk:reward ratio is on the trade.

It's not because "I'm smart."  Or, that "I think I'm smart."  I work my azz off.

If you are determined to play these games with me, and determined to "take me down," and so determined to get my atention,  I've got plenty of "game."  And, you definitely have my attention today. 

Arrogant?  No.  Self-confident.

You simply aren't someone with whom I want to spend my time.

If you want to be friends, Mike, you will go back to some of the folders that I mentioned, and "do the right thing."  You will STOP this nonsense about TA vs. FA.  It never was about that. It was about yourr rudeness, as I mentioned to you my "smite post" to you in the VPHM folder, and as I mentioned to you in my messages today. 

You don't want to get that.  You want to dance around that issue, like that dancing man at the bottom of your posts.

Here's what you will do, if you are sincere about wanting to be friends, and if you are sincere that you aren't smiting me.

You will recognize my "9 Bear Moves" in KOMG in that folder.  You will recognize my "2 Bull Moves in KOMG."  You will recognize my "I bought KOMG at 29.25, above 29.13-29.17 resitance (I was a little late on my buzzer).

You will go back to the CKCM folder and "do the right thing" about the hours of posting that I did, and post something about that 13.55 downside target that was IN PLAY, that when it finally hit (the low was 13.52), I posted in "real time," with a chart attached.

You will go back to the VPHM folder, and acknowlege something like, "Ya know, Melf wasn't completely crazy with those sells  that he posted a month ago, and with the 4 sells that he got, subsequently.  I see that I can have all I want of VPHH, below all 4 of those sell targets."

"Something", Mike.  Anything that indicates to me that you have "any" respect for the hours of work that I have put in, to "try" to help. 

Anything that even remotely suggests to me that you are  sincere when you say that you respect my work, and that you aren't smiting the crap outta me.

Apologies to the rest of the community, if you read this.  Some of you already are  in the "House of Pain," so you might relate, because I feel that way, too, having Michael "Mike" on my azz.

It feels like a little kid, when you're in the garage, trying to work on a project.

"You're going to hammer your thumb, Melf!"

You don't know what you're doing, Melf!"

You're arrogant, Melf, thinking that you could fix that!"

You never want to hurt the kid, but you definitely want to say,

"GO IN THAT HOUSE OF PAIN THAT YOU SEEM TO WANT TO BE IN, BUT GET AWAY FROM ME.  I'M TRYING TO WORK, DAMMIT."

Quote

Thanks to all contributers in this DIET autopsy.

My normal approach is to NOT hold through earnings, sometimes I do if I think the story could give a significant upward move when 'news' releases. I thought that was the case for DIET, hence I held through earnings.

So it went the wrong way, and I stopped out for I think about 20% or so loss (was 10% gain).

I have sold because the price did not react the way I expected, therefor my reasons to hold have dissapeared and I do't want to add it to a manufactured 'long port' that contains stocks that didn't do as would have liked, yikes that port would be chock-a-block with tickers

DIET may well come back as Fresh Cuisine numbers grow over the coming months, but for me I have played the stock (for a specific move), it didn't work out, so I move on.

Good Luck

Dear Melf Elf,

I will leave the personal issues as we left them yesterday. I don't think the rest of the forum is too interested.

But as you are commenting on what I wrote in my private message to you about eDiet and other memebers might be interested I will copy that part here:

QuoteConcerning DIET I agree with you. I would have sold that stock on the opening after the earnings release.........

Now some members didn't sell and they are now sitting on a loss. To trade the stock now has tax implications and cost commission. If I was a holder I wouldn't sell at this point in time. I think there will be a better exit point for short term holders and I still believe that long-term holders might recover their losses. I guess that that was what I tried to communicate.

Concerning your last point about smiting you in the DIET folder. I really don't know what to say. I am not shy of disagreeing with anybody including you and I certainly wouldn't lie if I had smited you. On the contrary I would probably have done that in public.

You are correct that I didn't post that I sold the stock. I sometimes did that in the past. The result was an endless stream of smite points so I just stopped. If anybody ask me, which often happens in private messages, I have always revealed my position. As you are questioning my personal integrety I have made a screen dump of my Etrade account so you can check for yourself (I am sorry it is in Danish but Sælg means sell). As this is a bit personal information I will leave it here for a day or two:

http://www.3stocksonfire.org/trading/index.php?topic=1948.msg50981#msg50981

Now here is the good news. As most of you might know by now David and Fred have asked me to join the trading team so from now on you and everybody else will know exactly when I buy and sell. I certainly hope that I will still "smell like a rose" after that change  

Mike

DIET - has a complicated past here but I will comment specifically on the current situation.

After a gap down and a tall red(down) candle DIET showed no hint of support as it continued lower breaching the 200sma and the $5.00 level.  Since the price recently oscillated at these levels(4-5) support is expected to show up soon. 

Simply a sign of support will not be good enough to hold this stock.. as DIET could take its time clawing back up.  Time is money and this is the 3stocksonFIRE portfolio    We are hoping DIET can bounce back strong starting on Monday and perhaps setting a good tone for the week.

In case the market does not consider DIET a good play here we will be setting a stop @ 4.64.

What will the market have in store for us this week?