Larry Pesavento - Rockets Red Glare!
by Larry Pesavento
Traders like Larry Pesavento point out that there are rare events in the stock market that leave a huge trail of unanswered questions. October 19, 1987 was one such event – volume 600 million shares, only 8 issues on the NYSE were up that day (out of 3300 issues). A panic by Buffett’s, Pesavento’s or anyone else’s definition. Later we were to find out that the Federal Reserve Board opened their vaults and let Wall Street know that "It stops going down today". The massive influx of capital and the subsequent rally had marked the most significant bottom since 1982. Ironically the low of the Dow Jones on October 19, 1987 (1600+) was an exact .618 (Fibonacci retracement) of the August 1982 low.
Traders like Larry Pesavento remember on September 21, 2000, when Intel surprised "the street" by issuing an earnings warning. The stock closed on Wednesday night at $61/share. Reaction to the news in after market trading was devastating. Intel dropped to $48 - down 13 points in a few seconds. This was a $100 billion loss in capital, a figure which does not escape the attention of expert traders like Pesavento and others.
At the end of trading on Friday September 22nd, 2000 the NASDAQ market sent a signal to the world - a Rocket´s Red Glare as Larry Pesavento would say! Intel had traded 304 million shares in a single day sur¬passing the old record of 187 million shares held by Oracle in 1997.
Here is some food for thought that successful traders like Larry Pesavento note:
-
Intel's volume was 1/2 of the total volume on the NYSE on Black Friday - October 19, 1997.
-
Normal volume for Intel is 38 million shares vs. 304 million on September 22nd.
-
Intel opened on the low of the day at 46 and a fraction and stayed in a 2 point trading range the entire day (46 1/2 - 48 1/2).
-
The above observation is technically the most amazing accomplishment in my opinion. 304 million shares changing hands in a stock that just lost 100 billion of its capitalization and it was done in a two-point range. Larry Pesavento points out that for every buyer there must be a seller and they were there in droves on Sept. 22nd.
-
The average trading range of Intel is approximately 5 points a day!
-
The initial response to the Intel earnings warning pushed stocks lower across the NYSE, NASDAQ and S&P 500. Pesavento points out that by mid day many shares had rallied to be up on the day. Only the chipmakers were unable to rally.
-
Triple digit losses were seen in the Dow and NASDAQ. The Dow Jones made a miracle recovery and ended up over 80 points for the day; and it did this while one of its key components (Intel) was down 13 points or 20%!
How do traders like Larry Pesavento interpret all of this activity? Out of chaos comes change! It is the opinion of Pesavento and others that Intel is at the edge of a cliff. It can either sail off into oblivion or step back and re-group. Larry Pesavento comments that during the 1920's and 30's the United States had over 2000 car companies - today we have 2 1/2!
Intel's September 22nd low occurred at an exact Fibonacci expansion (1.27) from the previous high. Intel should hold the $46/share level to remain bullish. Going below $45/share would make traders like Larry Pesavento very nervous. This is one of the lowest risk opportunities that Intel has presented to the market in many years.
Pesavento is quick to point out that in Chinese writings the characters for risk and opportunity are the same. The use in the sentence determines the meaning. It is the same for Intel's stock now!