So, you think TIE is a bargain?
That’s what I thought. For the first time in a long time I was ready to buy a lot of stocks long. My biggest temptation was to load up on Titanium Metals (TIE) because I felt it was a bargain below $32.00. Then I realized I was being stupid. For no reason I just felt the market was going to turnaround on Tuesday (tomorrow). Now that it’s the end of the day, looking back, TIE was one of the worse performing stocks of the day. So, I ended up not buying, and decided to stick to my plan- trading TIE closer to $35.00.
If TIE shows weakness for the majority of the week, I’ll be prepared to short this stock down to $25.00. From these charts alone, TIE doesn’t look like a bargain, but ready to fall hard.
[Intraday 6-12-06]
For the past few days, whenever the Dow struggles, TIE will have a noticeable sell off at the end of the day. It seems less people want to hold this stock overnight, which means more people think TIE is dangerous to hold (TIE trades at 32 times earnings). In today’s example, TIE fell apart after crossing below $32.00.
[Chart 5-day]
A drop from $38.00 to $31.50 in four days may look like a bargain, but in this case, the failed rally on Thursday + the stock falling below Wednesday’s low makes this a risky long entry point. Usually when this happens investors give up on the stock- sell to break even, or sell to cut losses. And a lot of the shorts enter.
[Chart] 3 Months
Finally, in the medium term, TIE’s attempted rally is in serious threat. TIE is in much need of a earnings report, but when that day comes, it would be risky to hold long because anything short of a blowout quarter will be disappointing and prove this “32 times earnings” stock is overvalued. If this negative pattern continues, or the market does not rebound, TIE will be a stock that gets hit hard. There’s no support in this high flying stock, so the risk-to-reward ratio is not worth it during this uncertain market. If you must go long, wait until the inflation news goes away!
