Long Sohu.com Inc. (SOHU)

It is just brutal out there for a trend investor right now, at least for one like me who has a 3-month time horizon. Sure, as a day trader I could pick up trends at any time because I'd be looking minute by minute. But all long-term trends have either been violated or are approaching or at overbought territory. Woe is me. But not to despair. When you are not in a trending market, you are in a "stock-picker's market." What do all these terms mean, anyway? To me, it means that I need to start looking for horizontal resistance and support rather than a diagonal trend line. And, hence, I give you Sohu.com.

Oh, before I go on, sorry for not writing on a Sunday, but I really had a brutal time finding something to invest in this week. It took me until late last night despite spending 2 hours on Sunday. Things just don't look great out there for plays in either direction. This market has little volume and is in significant limbo right now.

Fundamentals

I just love the comparative valuation against its competitors. Operating margins are over 10 times the industry average. The Price/Earnings Ratio is at less than half the industry average. The PEG Ratio is the only slightly suspect thing for me, as I love a PEG ratio below 1. This is important for me, and it's not even close enough for government work. However, with the other valuations in the table looking great, I will accept it (but not overlook it). Thankfully, the PEG ratio is still the lowest among its competitors and significantly below its peers. So valuations look very good.

Technical Analysis – Monthly

On the monthly chart, you can see the Relative Strength Index (RSI) is at around 50, a point of support. Look at the behavior of this stock as it hits 50 over the years. It bounces every time. The chart itself doesn't tell me much. No Fib. Levels to speak of. Stochastics have no relevance with the pattern they've been exhibiting. I'm not a huge fan of the price relative to the Wilshire 5,000. This stock has clearly been underperforming the broad market for almost a year now. What I do like, however is the Accumulation/Distribution line, and this is really one of my favorite indicators. As the stock pulled back to bottom in January of 2009 and again during the recent pullback, look at how the overall trend of the A/D line remains upward. Granted, it's flattening, but I consider this a positive sign for a stock that peaked at around $88 and is now at $50.

Technical Analysis – Weekly

On a weekly chart, the RSI is showing a similar support level at around 35, which it just bounced off of. The most compelling thing for this stock, and the real reason I chose it is the price support level it just bounced off of. Look at the $48/$49 level and the amount of volume that has been present at that level over the past 3 years. It bounced off nicely. I would have preferred more volume on the upside bounce, but it tested and recovered. There is divergence in the Stochastics. Good for some, but I like to see stocks diverge twice in succession before I pay attention to the Stochastics, so nothing of note there. Again, the Price Relative don't look so good . . . And the A/D Line could be a bit more desireable, but did not fall as fast as the price did in the most recent decline. To reiterate, the stock just bounced from the most significant support line over the last 3 years. That's notable.

So that's what's up in Glen-land. Thanks so much, as usual, for reading.

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