Thursday, February 7, 2008

NYSE:BID Sotheby's - Buy, Sell or Hold?

Southby's, milking the art craze for all it's worth but its stock is getting knocked around a bit in the process. The chart looks a bit daunting after a nasty four month decline which trimmed a cool 40% off the recent high price of $61.40. I suppose we could ask ourselves, "Is the party over, is the art market going bust like it did in 1990's?"

Sotheby's, NYSE:BID Weekly Geometry

For a moment, it did look like that might be the case, but the central banks now seem to be falling all over themselves to lower interest rates. Of course, the charge was kicked off by Generous Ben of the FED and it appears like everyone else wants to get in on the party. So, what does this have to do with art? My hunch is that fine art and collectables (that other junk Sotheby's auctions) is being seen as a store of value, like gold but more fun to own.

The weekly chart for BID looks like a lot of other stock charts which were trashed in the recent decline. Volatility reigns and brown pants are back in fashion on wall street. So what are we going to do, curl up in a ball and wait for it to feel safe again?
Some of that money sloshing around is going to find its way back into the stock market (actually quite a lot of money will end up there) and some of it will slop back into the art market.

So I say, Sotheby's stock is forming a bottom right here in the mid-thirties. A move above $38 would reestablish the upward trend and suggest a retrace back to the old highs at sixty dollars. One little issue, the bottom is not quite complete timewise. I've marked on the chart what I think the MACD must do to confirm a bottom, this upward curl will take about four chart bars, four weeks. So there is no reason to chase the stock, but if one is interested in buying paper that appreciates instead of fine art itself, BID might be a decent choice

@ $28-$32 STOP: @ $26 Target: $60-$80

At the time of this post, I have no position, Long or Short in BID.

No comments: