First good idea

[Ps3tn0NcYk]

The better play would have been to buy the the DSUP 10.75% bonds maturing 9/15/2008 and short the common as a hedge against bankruptcy.

[DesertCat]

[ QUOTE ]


A super simple TA system is currently predicting one of two outcomes:

1.) Based off the the September highs, price is going to mirror the initial 7.5 point drop from 14ish and trade down to about a buck-fifty

2.) Based off the the September highs, price is going to mirror the initial 50 percent drop from 14ish and trade down to $4.50.

...
Depending on any short seller-base in the stock, it may cycle a bit higher as bears realize some very healthy profits. In this scenario, I suspect some short covering will occur and eventually price will settle around $4.50 and churn sideways for the foreseeable future (it is a "rotten tomato" now).

...

My guess is it trades toward a market capitalization of about $50 million (about $2.70 based on reported issued & outstanding shares) before either getting it's act together or getting delisted and vanishing onto the OTC-BB.


[/ QUOTE ]

This is what I love about TA. Four different answers, and one of them guaranteed to be right.

Interestingly DSUP came up in a discussion with some friends who researched it. I give you their (pre-refinancing) comments.

"My somewhat charitable characterization of DSUP is their business earns a lumpy 10% ROIC (excluding badwill). Perhaps not a terrible business if you lever the assets 50% at 6% interest. Unfortunately they're levered 120% at 12%. "

"What a classic IPO case study. A single year of revenue growth and lots of lipstick = ka-ching."

[Ps3tn0NcYk]

Incorrect. Two answers -- ~$1.50 or ~$4.50. The rest was personal conjecture. Note that my prediction of ~$2.70 is close to the midpoint of the two scenarios and also aligns nicely to where many companies facing financial or execution difficulties settle in terms of market cap before either folding or turning around.

With that said, DSUP's relatively short life as a public company retards more advanced applications of technical analysis.

Anyways, I agree with the "IPO assessment". My thinking was along the same lines. Brilliant move by insiders and the underwriters.

[CrushinFelt]

lol like that's any better

[Ps3tn0NcYk]

In your estimation, how might the analysis be improved? Specifically, what are your expectations? I demonstrated a very simply technical system using only price and support. The lack of trading history in DSUP eliminates the ability to use the issue to demonstrate more advanced practices. Not that I'd open my toolbox and publicly share them anyways.

Instead of busting on TA, which by any measure would have had longs out of the stock on the break of $10 in July and $7 in November (and likely flipped to shorts), it looks like the Fundamental Analysis on DSUP in this thread is truly worthy of scrutiny.

What went wrong? Why is the stock 66% lower since a someone recommended it based on FA?

More likely it is -- LOL @ FA.

Some here have a $9 dollar price target on DSUP based on ASSUMPTIONS of future operational execution - "if X happens I think the stock will go to $9, if it doesn't happen it probably will go lower".

What's the difference between these assumptions and the assumptions embedded in TA -- "if price breaks X it will likely go to Y, if not it will go the direction of Z" ???

[icetonez]

You're both wrong! It's all about IA . My purchases have been based on the following analysis from The Motley Fool CAPS board:

mbuggle (< 20) Submitted: 1/05/07 3:58 PM : Start Price: $11.00
Score: -63.31
USA will continue to experience a surge in immegration. This in turn will continue to drive the need for government to engage companies like DSUP. This baby will fly , its just a matter of time. Please also note that Dsup has been targeted as a strong buy by 2p2's own Brandi Rose.

[kimchi]

I haven't been following this thread, but all this 'my method is better than yours' is pretty pointless. I don't know what the original OP's / investor's objectives were but I'm sure they haven't been met with this particular purchase/trade.

It's easy but uncomfortable to look trades or investments gone wrong, but it is also essential. I haven't read anything in this thread about exits or position sizing or any form way to limit initial risk. Losing two thirds of an investment is a mistake, regardless of what the stock should have done or will do. There is no should or will in the market. There is only is.

I think a proper post-mortem analysis should focus on at what point the investment should have been sold to limit initial risk, and and what point stock should be bought again to be positioned for the anticipated move.

[kimchi]

Cliff’s notes: Buy at $12, sell at $9.50 and wait for confirmation before buying back in (assuming the fundamentals favour such a position)

I think TA is perhaps of limited value for analysing a thinly traded market which has only existed for a few months, but I thought I'd post some thoughts and ideas anyway. I’ll post a list of opportunities to exit along with a future opportunity to re-enter the position should the OP’s fundamental analysis of the company still provide a set-up to begin accumulating stock again.



The stock seems to have found its first support just above $10 (blue line) and entered a rather weak/shallow cup with handle pattern at the beginning of March. There is a weak handle at the beginning of May, followed by a breakout on 21st May. Longs can be entered on this day around the $12 mark (I know it’s thinly traded, and I’m not sure what the OP’s position size was and whether it contributed to the uptrend during May/June)I believe the OP scaled in his purchases somewhere within the uptrending channel (during May-June). A sensible stop-loss could be below the initial support (ie-below $10) or as a function of ATR. A 15-day smoothed ATR on 21st May was around $0.50. This is a volatile market and wide stops would probably be needed. 6xATR would provide plenty of room to whether noise, but leave us exposed to high initial risk.

Break of support stop ~ $10
6 x ATR stop ~ $9

So, placing a stop around $9.50 would leave us exposed to $2.50 initial risk assuming we got in at $12. This equates to a 20% drop in price – quite a wide stop. Getting out at that price might obviously prove to be a headache in a thinly traded market. If we have a $100K account, then risking 5% of that would probably be too much, but not desperately unreasonable for a concentrated portfolio. 5% of 100K would be $5000. $5000/$2.5 = 2000. So, buying 2000 shares of DSUP for each $100K account size of would expose us to 5% initial risk. This would equate to an initial position size of $24000 (assuming $12 entry with a $100K account).

Looking back at the chart, we see EMA22 and EMA 110 (1 month & 6 months respectively) turn bearish around mid-July. EMA22 is enveloped by an 11% shift which contains most of the market’s prices up to that point. (11% is very wide /volatile). Even this 11% envelope is unable to contain the 6%+ break on and continuing after 25th July. The stock then spends about 1 week around the support created during March/April and touches our $9.50 stop on 30th July. On 30th July and onwards is when the position should be dumped/scaled out of . On 7th August the stock gaps down and closes over 15% in the red. There is more temporary support around $7 before the market jumps into temporary resistance around $9 and fails to test the support of $10 created several months prior. The market then breaks this new support in the second week of November and goes into free-fall.

Looking for another entry:
If you look at the negative MACD histogram and the low prices, you can see that the histogram low created around the 10th August is lower than the current value even though current prices are lower now than they were during the previous MACD-h low. This suggests a bullish divergence is brewing. This is one of the strongest signal in technical analysis and suggests the bears are running out of steam and selling pressure is subsiding. If the new negative MACD-h traces a higher low while the market traces a lower low, then there's a bullish divergence. Wait for the stock to tick up and for the slope of EMA22 to point upwards. Further confirmation would be EMA 110 turning upwards but this will be severely lagging after a strong bear move.

Once (or if) an upward move is confirmed, then another position could be built using the suggestions above with regards to initial risk and position sizing. A stop can be placed under resistance, as a function of ATR, or below the recent low.

I can’t see an entry at the right edge of the chart, but you need to watch for possible confirmation in the future. Should an upmove be confirmed and a large position needs to be built, then we can use the oscillator (Williams %R) to scale in. Buying the dips during an uptrend (ie - when EMA110 is pointing upwards, but Williams %R is below 80 and rising) allow us to buy value, and perhaps with reduced slippage.

[krishan]

Kimchi,

Although I don't understand anything you wrote, I liked it much better than the first TA piece. [img]/images/graemlins/smile.gif[/img] Here is my take on things.

Q1 report was good. Above expectation with regard to gross margin/end markets. Levered to non-residential construction which was seen as strong. Stock also rose on strong language regarding debt refinance. Management guides to 80m in EBITDA for '07. Stock pushes to $14.

Subprime meltdown begins and DSUP decides not to refinance at 8.5%. They believe debt markets will improve and they can get a better rate on their 330M in debt. Concurrently, rains in Texas delay construction (they are a concrete additive company) and it looks like they will miss analyst expectations for Q2. It's a new company and analysts through up numbers around the guided 80M in EBITDA.

DSUP misses Q2 on weather and backends the EBITDA numbers (AKA the kiss of death). Other than revenue shortfalls, rest of stats, margin trends, utilization look okay. I wasn't worried at this point. Stock falls sharply to 8. Analysts adjust models to account for stronger EBITDA generation in Q3/Q4.

Q3 non-residential construction starts to slip particularly in florida and baltimore/washington. Q3 report comes in and DSUP misses badly. 80M EBITDA is no longer doable. Looks like 80M in '08 is reasonable. Debt refinance comes in at a blended rate of ~7.6. Market kills the stock dead.

Krishan

[kimchi]

Edit: I've just noticed my chart image is cropped and missing titles. The middle window is MACD (24,52,18) and the lower one is Williams%R (28).

[ QUOTE ]
Kimchi,

Although I don't understand anything you wrote, I liked it much better than the first TA piece. Here is my take on things

[/ QUOTE ]

That's OK - I don't really understand much of your fundamental analysis [img]/images/graemlins/smile.gif[/img] although I fully acknowledge its validity. It wasn't all TA, I wrote about managing risk too. I was ultimately trying to suggest a better way for your position to be managed and exposing your account to less risk.

How are you managing risk on this position? Since risk is one of the only thing you can control in the market, I believe much of your attention should be devoted to it.

I think perhaps you might see the stock as getting cheaper if the fundamentals were to remain the same, prompting you to want to make further purchases. When you built your initial position, what were your objectives? What were your criterion for selling?

Perhaps you found an undervalued stock and loaded up, but if the market doesn't agree with your valuation (and the market is always right), then there must come a point where you acknowledge that while your analsis was correct, your timing wasn't, and you have to sell to preserve your capital so that you can profit during the times you are right and realise the +EV of your work in the future. Assuming you're down 65% on this stock, you'll need a 285% recovery to return your account to break-even - no easy task.

As I said in the TA vs. FA thread last week, fundamental analysis can provide excellent set-ups but TA privides superior trade and risk management, together with a way to implement disciplined entries and exits. I think using both can be more +EV than either in isolation.

Unfortunately, I know FA about FA [img]/images/graemlins/confused.gif[/img]