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Is Barnes & Inc. Expecting More From Harry Potter?

07/28/03 10:25:51 AM
by Koos van der Merwe

It is not what you feel that gives you profits in the market, it is what you see, and Barnes and Noble does look interesting.

Security:   BNBN
Position:   N/A

A look at the chart shows a large cup and saucer pattern developing with the handle appearing to form a consolidation triangle. The rise on June 12 was caused by the announcement that pre-release orders for the book Harry Potter and the Order of the Phoenix were far greater than anticipated.

The expected profit windfall pushed the price from $1.73 to $2.98 over a period of six days. Since then it appears to be consolidating in what could be a major rise to a target of approximately $5.00 ($2.99 - 0.97 = 2.02 + 2.99 = 5.01). However, before this happens, the price would have to break above the upper triangle boundary, line BC on the chart below. This would give a very positive buy signal, but the price could meet resistance at $2.99, fall back turning the BC resistance line into a support line, and then possibly rise to retest the $2.99 resistance. A break above this level is a break out above the cup and handle formation, confirming the rise to the estimated target of $5.00.

Barnes and Noble .com
Graphic provided by: AdvancedGET.
Finally, do note that the RSI indicator is pointing downwards, with a possible buy signal at the 38 level rather than the traditional 30 level.

The share price also gave a JM internal band "buy" signal in June as shown on the chart, and has not given a sell, although traders would have closed positions on rising stops in the fall from the high at "B."

An internal JM band, as showin in the chart above, is a 28-period simple moving average offset upwards by 6% and downwards by -6%.

I would not buy this share yet-- but it is on my watch list. As I wrote above, it is not what I feel, but what I see that is important and I am waiting for a very definite buy signal to be given, before I am tempted, one way or the other.

Koos van der Merwe

Has been a technical analyst since 1969, and has worked as a futures and options trader with First Financial Futures in Johannesburg, South Africa.

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