Getting Closer

The summer of cheap prices continues. Despite today’s healthy tech bounce, we’re still awash in cheap prices that appear to be set to go a little lower. I can’t emphasize enough the importance of knowing what you want to buy and at what price. Remember, when prices are falling, the news is bad. That means that when your stock finally hits the price you once thought would be cheap, you could still be scared away by ugly headlines. Don’t let that happen.

Let’s revisit the stocks I wrote about on Monday. This week, Sun Microsystems has continued wobbling between $3.60 and $3.80. I mentioned way back in February that the $3.75 line was key in buying again because it represents support in Sun’s long-term channel of higher highs and higher lows. The stock is always volatile, but in a steadily upward progression over the past two years. While $3.75 has not proven to be unbreakable, it has certainly been close. The stock dips below it only briefly and then quickly gets back above.

Therefore, I’m putting in a limit order to buy some shares at $3.60, thinking it could hit that on a quick downdraft. Mind you, I’m not buying my entire target position yet. I always buy and sell in stages because, like everybody on the planet, I never know exactly what prices will do. What I do know, however, is that I sold Sun at $5.85 back in February intending to buy again below $4 over the summer. I’m sticking to that plan. If it drops significantly below $3.60, I’ll buy more. I’m confident that Sun will rise above $4.50 in the fall and I think it’s possible that we’ll get above $5.50 again by the end of the year. Someday the stock will break out and we’ll see double-digit prices again, but I have no prediction on when that will happen. 

Next, there’s UT Starcom, Kevin Landis’ pick for the year. While the ever-prescient Mr. Landis suggested that you buy at the beginning of the year at $37, I suggested waiting, and waiting. Even in my Monday article, with the stock down some 33% at last Friday’s close of $24.87, I said that while cheaper prices had arrived, perhaps very cheap prices had not yet. Indeed. After missing earnings on Wednesday, the stock now trades at $17.84, down 52% so far this year.

Then there’s Maxtor, the hard-drive maker that SmartMoney suggested buying in January at $11. It closed last Friday at $4.84. It’s now at $4.60, down 58% so far this year.

Time to buy? Not yet for me.

To see how these three stocks are doing now, click here.

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