Rhodes: Add Asian Focus through Sony

06/20/2003 12:00 am EST


Richard Rhodes

Founder, Rhodes Capital Management

"We believe the relative value of Japanese stocks will become more prominent as the year unfolds," says Richard Rhodes, technical trader and editor of The Rhodes Report . "One only needs to look at the technical trading pattern of Japan vs. the US. and the emerging pattern is bullish for Japanese shares. In addition, the SARS virus has caused Asia to lag the US, and hence a bit of catch up is required. As it progresses, the ‘value story’ of Asian shares vs. US shares will come to the forefront." Here, Rhodes discusses Sony, his latest trading position.

"Our choice to play this trend is Sony (SNE NYSE), the developer, designer, and manufacturer of electronic equipment and devices for both the consumer and industrial markets. Sony has a hand in many businesses, which gives them a play on the overall economic improvement in both Japan and the US. The stock’s weekly chart is fairly ugly given the large decline off the highs near $160 during the 1st quarter of 2000. But it would now appear that prices are attempting to find a bottom at current to lower levels. We suspect the larger decline is over, and at a minimum, a counter-trend rally has developed towards overhead resistance upwards of the $38 to $45 zone.

"Technically, on a daily basis, the decline from last summer is quite stark–falling from near $46 to a low in April of $23. However, since that ‘spike low’ was formed, prices have rallied in a fairly sharp manner in conjunction with the overall Japanese market rise. We consider this as a midpoint in this rally rather than a topping process. We look for prices to return to the declining 100-day and 200-day moving averages crossing at $33 and $38 respectively prior to any substantial pullback. And having said this, we are willing to commit to long positions below the $30 level. We shall peg our risk in the trade to the $26 level."

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