E Betting Against Buffett - VRSN

Warren Buffett has two well known technology companies in his portfolio. While one, IBM, has been a loser, the other, Verisign (VRSN), has done quite well. Verisign is a global leader in domain names and Internet security. It ensures the security, stability and resiliency of key Internet infrastructure and services, including the .com and .net domains and two of the Internet's root servers, as well as performs the root-zone maintainer functions for the core of the Internet's Domain Name System (DNS). Buffett bought VRSN in Aug 2014 around $54/share and it is now around $89/share, a gain of about 65%. However, looking at its chart, I see some troubling signs.

  1. Narrowing of Bollinger Bands. The Bollinger Bands are two standard deviations above and below the simple moving average.  A narrowing of the band usually indicates a sudden and large movement in either direction.  From the chart above, it looks like the bands, shown in green, indicate a dramatic movement in the up direction or dow
  2. Volume.  Volume is an important indicator in technical analysis as it is used to measure the worth of a market move. If the markets have made strong price move either up or down the perceived strength of that move depends on the volume for that period. The higher the volume during that price move the more significant the move.  As can be seen in the chart above, down days have come on above average volume while up days have been on light volume. This is usually an indication of selling pressure.
  3. MACD or moving average convergence divergence.  Moving average convergence divergence (MACD) is a trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals.  Crossovers can signal a buy or sell point.  When the MACD falls below the signal line, it is a bearish signal, which indicates that it may be time to sell.  As the chart shows, the MACD turned negative around March 28.
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