Crocs' warning was in its chart, see what others fit the pattern

Posted Apr 15th 2008 8:26AM by Timothy Sykes
Filed under: Major Movement, Bad News, Dell (DELL), Intel (INTC), Technical Analysis, Crocs Inc (CROX), Stocks to Sell, Garmin Ltd (GRMN)

Damn, it feels good to be right! Back in mid-February, when I warned investors not to buy Crocs Inc (Nasdaq: CROX) after its "big" drop, I had no idea they were going to warn and get crushed again so soon (see, Steven Mallas' post from last night). But the stock's chart pattern told me the odds favored the bear case.

So, you know what? I'm not particularly surprised. Because I play the odds based on what the charts tell me. Sure you're probably sick of hearing that from me, but for better or worse -- and considering my 21% return in the first quarter of 2008 by staying true to the charts, it's been mostly better -- this is my my experienced-based belief.

No matter the stock -- whether you're talking Google Inc (Nasdaq: GOOG) or Wachovia Corp (NYSE: WB), the oil, technology or retail industries, the time of year when it pays to be bullish, analyst expectations (they only get it right 30% of the time) or the market cheerleaders promoting crazy price targets like this one on Apple Inc (Nasdaq: AAPL) --if the chart is too steep, I'm wary. If the chart is downtrending, I'm short-biased.

A lot of fundamental investors disagree, saying the stock market isn't that simple. But lately, the people who believe in valuation over charting are going down with the ship -- no matter that they're CNBC regulars!

But patting myself on the back doesn't help you all, so I focused on some stocks that have similar chart patterns to Crocs -- before this latest drop -- to see what other stocks to avoid. Here is my list:

Dell Inc (Nasdaq: DELL)

Garmin Ltd (Nasdaq: GRMN)

Synaptics Inc (Nasdaq: SYNA)

E*Trade Financial Corp (Nasdaq: ETFC)

Intel Corp (Nasdaq: INTC)

Six Flags Inc (NYSE: SIX)

And, those are just from some quick analysis! There are tons more, and I'll detail them in a future post. But for Crocs-sake, don't be caught dead holding any of those stocks going into earnings. Sure, they could surprise and their stocks surge, but the charts show that the odds are against that happening.

Timothy Sykes writes the blog timothysykes.com, is a former hedge fund manager, star of the TV show Wall Street Warriors and author of the book, An American Hedge Fund: How I Made $2 Million as a Stock Operator & Created a Hedge Fund

Tags: Crocs, Crox, featured