The Tycoon Report

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6. chaos_nantuko (1 year ago) Is this Spam?

   In my example (PCP), I was wrong. My mistake was ignoring the overall market conditions at the time. The market internals and externals were giving sell signals, and i should have taken that into account when forecasting the stock's price movement.
   
   I still think TA has predictive power, but I took too narrow a view of things. No indicator can stand alone.

5. Alexander H (1 year ago) Is this Spam?

   "As for a more advanced technical analysis. I'm not completely convinced in their ability to predict the future, mostly because their significantly more subjective. The only real way to prove if they're reliable would be to find someone who is extremely good at using them, and if such a person can make money consistently over a long period of time, then they must be there."
   
   
   
   I strongly disagree to the mere view of TA as a means of predicting the future. To my understanding, TA tells you what is going on in the market/with a security RIGHT NOW. Based on this information, you get an idea about if the odds are stacked in your favor. Nevertheless, the stock market is a place where the eventual result is not necessarily linked to the actions you take per se. In a place like this, you cannot solidly predict the future with TA. All you can do is stack the odds in your favor. And the more different aspects you watch and combine, the better your chances become.
   
   TA cannot be viewed as a "science" because science must be objective and reproductable. This criterion is not met by TA because of what I mentioned above (no necessary link action vs. outcome). I would consider TA as a sort of helpful art, but I cannot take any guru who claims "to know it all" solely based on technical analysis really seriously.
   
   One might disagree, but I believe there cannot be a system of TA that consistently predicts the future accurately. This is not possible because of the nature of financial markets itself.

4. Ken (1 year ago) Is this Spam?

   As I see it there are different kinds of minds involved.
   
   
   
   Some people are very visual in their understanding of things, and others are more fundamental. Both methods work to a certain degree. The emphasis is different depending on whom you listen to.
   
   Some people are very good with fundamental thinking, economics, ect. They usually excelled in history, social studies, and this sort of fact based thinking that many consider normal. Many of these same people found advanced math, physics, and chart analysis, to be difficult subjects.
   
   Others are better with spacial relations and pattern recognition, their emphasis tends to be more visual. They usualy excelled in design studies, reading music, sometimes engineering, drafting, and advanced math. Many of these people find fundamental aproaches terribly boring and difficult.
   
   
   
   These same emphasis apply to the time frames and style you choose to trade.
   
   Long term investors rely on fundamentals and need very little chart reading. They're more concerned with the valuations and qualities of what they own.
   
   Short term swing traders rely on the charts and have little need for fundamentals. Their more concerned with price movement and trade management.
   
   In the middle you have position traders who use a bit of both. They want to know why they are trading something, but they also want to see that it is going in their direction and employ proper stops and management techniques.
   
   
   
   All of these methods work. Hence you have a great diversity of trading styles available. It really depends on your goals and aptitudes. There are good arguments on both sides of the fence.
   
   Can you comfortably spend hours going through charts looking for patterns, trends, breakouts, etc. Or are you more inclined to spend time learning whats going on in the world, the markets, the individual industrys and companys.
   
   Either way its very important to identify your strengths, your natural inclinations and aptitudes, and play to your strengths, but it's equally important to work on your weaknesses, whichever they may be.
   
   
   
   Ken

3. chaos_nantuko (1 year ago) Is this Spam?

   Nice analogy.

2. D. (1 year ago) Is this Spam?

   Just a thought.
   
   
   
   When an inexperienced hunter goes out he randomly walks or drives around hoping to find a deer.
   
   Years later he has evolved into an advanced hunter. He now scouts the area looking for sign, tracks, scrapes, rubs.
   
   
   
   The real pro by advancing this further can tell you with a very high degree of accuracy the exact buck he is after, the trail he frequets, the time he crosses through the exact trail within minutes and a rough score of the headgear the buck is wearing.
   
   To hunter #1 it all sounds like hocus pocus and he rapidly dismisses it because for him it doesn't exist.
   
   Yet in checking the results of the three hunters #3 always gets a Boone and Crocket buck.
   
   
   
   Results are the bottomline. If your system works great for you that's all that matters but don't criticize the other guy's technique if it works consistently day in day out and bags monster gains for him.
   
   What is the point?
   
   
   
   The stocks I prefer would not be suitable to share as they would be downright dangerous for some new investors to see without coaching.
   
   I prefer high volatility and I like what many would deem high risk and I hope they keep viewing them as such.

1. Ethan R (1 year ago) Is this Spam?

   If Technical Analysis is simply a prediction of the past, then why do so many technically overbought stocks pull back, even after a good earnings report? Why do stocks above the 200 day M.A. outperform stocks that are below their 200 day M.A.? Why do stocks head so much higher after breaking through prior resistance levels?
   
   
   
   As for PCP, I believe it would be more accurate to say that since it is just over the M.A. it has a "lower", not "low" chance of going down. False breakouts above the M.A. do occur from time to time. I am not sure whether you are referring to the 20 day, 30 day, or 50 day M.A.
   
   
   
   I think most people will find that combining technical analysis with fundamental analysis will improve their performance. The fundamentals help you to choose which stocks to buy, but the technical analysis helps you to choose WHEN to buy the stock.
   
   
   
   Using your example of PCP, the stock had run up from $130 to $150 between mid September and mid October. One would think the fundamentals had to be strong for this to happen. But anyone who disregards Technical Analysis and bought the stock at $150 or higher in mid October would have lost $10 per share over the course of four days. The stochastics were declining from over 80, and the RSI was dropping from near 70. Ignore that and you can quickly lose money.
   
   
   
   Many people would have been stopped out or just bailed out after losing over 6% in four days. But by waiting 4-5 days longer until the stochastic was below 20, you could have picked up the stock around $140.
   
   
   
   Technically, one stock I am watching right now is BWLD. The RSI and Stochastics are approaching oversold levels. The stock was slaughtered the other day on an earnings report that was below analyst's expectations, but it was still a profitable quarter. Revenue and same store sales were up and earnings were up 20%. Yesterday the stock was down only four cents, and on declining volume, on a day when the DOW lost 362 points.
   
   
   
   Although the longer term trend may not be as favorable (stock gapped down below support and the 200 day M.A.), I am looking for a short term bounce trade up to about $34 or $35. Current price is $30.62. I do not own this stock as I write this.
   
   
   
   Enjoyed your article, Chaos! Hope to see more people comment and add stocks.

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