January 26th, 2006

Sony (SNE)

Breakouts are wonderful…when they work; take, for example, Sony (SNE). In the post of October 11, 2005, I said “Unlike the situation here in the US, Japanese stocks, as depicted by the Japanese ETF (EWJ), have broken through a nearly two year consolidation period and are moving higher quickly” and presented this chart (now updated):

In that October 11 post, I listed a number of Japanese stocks that trade in the U.S. as adr’s (American Depository Receipts). One of them, Sony (SNE) broke through a resistance trendline on December 28 with a 4.4% upside gap and has continued to move up continually gaining more and more momentum. Today was another gap day with an 0ver 10% upside gap. The total move since October 11 has been 47%! Unfortunately, I bought after it broke through the upper boundary resistance line rather than when it was bouncing off the bottom resistance line but my gain has been outstanding nevertheless (see an earlier post on purchasing on bounce or breakthrough):

The saying is “Bulls make money, bears make money and pigs get slaughtered”. Am I waiting to get slaughtered by holding on or should I be conservative and take some profits after this stupendous move. For some clues, I’ll extend the time horizon to see if there are any “obvious” resistance levels to aim for:

Today, SNE hit prices at which it had congestion back in 1997, 1999 and 2002; 51-54 is a resistance/support area. The next level is 59 at which was an inflection point in 2002. The decision will be made soon as stock action over the next days and weeks as SNE struggles to move through the 51-54 area.

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