Take A Look At TASER Int'l

01/05/09 01:52:37 PM

by Koos van der Merwe

TASER International looks promising.

Security: TASR
Position: Buy

The rule of thumb is never to buy a share in a company that has a lawsuit against it. Tasers are designed for use in law enforcement and personal protection. The devices are meant to incapacitate dangerous high-risk subjects who pose a threat to citizens. Anyone who reads the newspapers, however, knows that Taser deaths have occurred. Unfortunately, statistics about crime prevention and lives saved by Taser are never brought to the public's attention. The Taser stain therefore sticks, but emotion should not be part of your decision-making.

FIGURE 1: TASER, WEEKLY. Here's a long-term trend.

Graphic provided by: AdvancedGET.

Figure 1 is a weekly chart and shows how the stock price rose dramatically in December 2004 from $2.17 to $33.48 over a period of three weeks. From that high, the price slowly deteriorated to a low of $5.46 by October 2005. The price recovered slowly to $20.45 by July 2007 and then started falling along with the falling Dow Jones Industrial Average (DJIA) to the low of $2.57 by November 2008. What makes the stock interesting is the breakout above the falling resistance line as shown, as well as the divergence signal of falling bottoms of the stock price to rising bottoms on the relative strength index (RSI).

FIGURE 2: TASER, DAILY. This chart shows an inverse head & shoulder pattern.

Graphic provided by: AdvancedGET.

Figure 2 is a daily chart and shows the breakout above the downtrend resistance line more clearly. It also shows an inverse head & shoulders pattern that developed and the breakout above the neckline. This breakout is suggesting a target of $7.31.

TASER looks to be a buy at present levels, but with the low volume anticipated on December 24, the trader could be lucky enough to buy at a lower price or wait till after the Christmas season, when a trend is more formally established. The positive result of the lawsuit is a plus.

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.