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Looking Again At Sony

02/17/12 08:20:59 AM
by Koos van der Merwe

In my article about Sony of August 17, 2011, I wondered if Sony was another Apple waiting for someone with imagination and vision. Has that time come?

Security:   SNE
Position:   Accumulate

On February 1, 2012, Sony named Kazuo Hirai as president and CEO; Sir Howard Stringer, the present CEO, will become chairman of the board of directors in June 2012. Is Sony now on the way up?

FIGURE 1: SONY. This OmniTrader chart shows vote signals buys and trailing stop sells.
Graphic provided by: OmniTrader.
Figure 1 is an OmniTrader chart and shows how Sony gave a number of buy signals at significant lows since September 2011, as share prices broke the downtrend and moved into a correction. The number of buy signals given with the sell signals as the price broke below the trailing stop does suggest uncertainty rather than a long-term hold.

FIGURE 2: SONY. This chart shows buy & sell signals on a JM internal band.
Graphic provided by: AdvancedGET.
Figure 2 is a chart showing the JM internal band indicator, giving buy & sell signals as the price broke above the upper band line and broke below the lower band line. The JM internal band indicator is a 15-period simple moving average offset by 2% positive and 2% negative. Currently, the share price is in a buy mode. Note that on February 2, the share price dropped sharply after the announcement of the change in the company's management but immediately recovered. This obviously reflected market uncertainty. Note the relative strength index (RSI) is moving up slowly.

FIGURE 3: SONY. Buy & sell signals on a 50-period moving average.
Graphic provided by: AdvancedGET.
Figure 3 is for the more cautious investor. Here the investor buys companies with known management superiority, those that look to the future with imagination and that you know will not fail. The indicator that the company must cross to give you that buy signal is the 50-period moving average.

Note how the price gave a buy on October 17, 2011, with a sell signal as the price broke below the 50-period moving average on a gap on November 1. It is almost as if the share price was anticipating a change in something or other within the company. The price then reached a low of $16.14 on November 21 and moved into what could be a rectangular pattern.

A rectangle formation forms as a result of a battle between two groups of approximately equal strength, suggesting that those in the know of a possible management change fought against the bears. Ignoring the down move of February 2, which recovered on a wide gap on February 3 that moved back above the 50 period moving average, Sony definitely looks like a recovery buy for a long-term hold.

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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