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Social Clubs / Deranged Monkey Criticism
|Subject: Re: Poll: Technical Analysis||Date: 5/14/2013 11:24 AM|
|Author: MDCigan||Number: 17107 of 20494|
It doesn't seem logical to think of TA as a subset of FA, in my opinion, and I have never seen any credible source where it is thought of this way. Can anyone find one? You get to choose which you do, or you can do both, but you don't get to choose what the words mean.
You are correct DTM. TA is not a subset of FA. It makes no sense to think of it that way. TA is about analyzing the supply/demand FOR THE SECURITY, not analyzing the valuation of the business or fundamental factors like sales, margins, cash flows
That said, a more nuanced and IMO often accurate view is that TA is a LEADING indicator of fundamentals. The thought process is that the price action reflects all markets participants of the fundamentals and includes people who know things/have better information than you. Here is a good example
I wrote about Tesla (TSLA) on April 4th, the blog post was entitled, "Tesla: Earnings, Smernings!" At the time, the stock was up 31% YTD and was hitting a new high. It had bullish cup-with-handle and inverse head-and-shoulders formations, a powerful duo. I wrote then, "Tesla is expected to earn a profit in FY2013, so as per usual price is likely discounting the future, moving on expectations as opposed to past history."
The price action and specifically the breakout on 4/1 after the mother of all bases for the past 2 years was broadcasting loud and clear that something positive was coming on the fundamental front. Breakouts out of long bases are probably one of the most reliable patterns that something material has changed in the business fundamentals. Unfortunately, I missed this move as I have yet to figure out how to develop a system to catch breakouts on the exact day they occur or within a few days short of simply looking at hundreds of charts each day which unfortunately I presently do not have time for.
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