Continuing along the theme of ARMY stories, the IBD has an article on ARM's TA and when you might have bought and sold:http://www.investors.com/editorial/winways00.asp?v=2/2
...and when you might have bought and soldTA in retrospective is always a beautiful thing, duma, like Nostradamus predicting 911. Show me where IBD made actual buy and sell recommendations prior to the fact. That could be worth something.-z.For the record, I waited to start buying ARM until it hit $2. (Dumb luck as much as anything.)
Hey Martin.....yes that age old debate of to TA or not to TA. As a casual observation, one might conclude that all major brokerages have invested enormous energies in TA.....must be a reason. That some are more accurate at TA than others shouldn't really surprise as the same applies to FA and DCF analysis.IMHO, TA if followed strictly, applies a set of rules to investing that may improve outcome since it forces sells and buys irrespective of love and hate, fear and greed, and the other emotions that play havoc with one's investment decisions.Just as other tools in investing, if you know a huge proportion of investors use TA, why wouldn't you know its basics so as to understand what this large segment might be thinking or doing?Do you really ignore TA or are you a "closet TA checker" just as a "double check" before you buy? Friendly.....
As a casual observation, one might conclude that all major brokerages have invested enormous energies in TA.....must be a reason. That some are more accurate at TA than others shouldn't really surprise as the same applies to FA and DCF analysis.There is the canned version of TA and then there is the TI's that we use ourselves. The canned verion is what can put an individual investor at a disadvantage and is probably what gives TA the reputation it has today. if you know a huge proportion of investors use TA, why wouldn't you know its basics so as to understand what this large segment might be thinking or doing?This is an interesting statement because what it says to me is that as far as everyday trading is concerned, the big fish already know what the little fish are going to do long before they do it. And they have a pretty good idea when they are going to do it. We all know where support and resistance is and we have an expectation of what might happen there. The bigger fish may use these expectations as bait. For example, they can push the stock below support to trigger the stop losses. As a matter of fact, I think most stop losses get taken out for this very reason. So now stop losses have to be set below support in anticipation of the bait. As reaction to action takes it course, the direction of the path will change. The most reliable TI's are based on volume and volatility as they really are indicators of the real power(or lack of) in the market. At the very least there should be double the volume or more over a period of several days to anticipate a major trend reversal. But even then if institutional support isn't strong, it might not hold. I also like RSI, CCI Momentum, the Bands and sometimes MACD. Before I buy I usually like to see a Buy signal on RSI, followed closely by Buys signals on the others. In any case, a major trend reversal is almost always preceded by a Fundamental change. The trick though is to determine if the fundamental change will cause a trend reversal or is it just a temporary change in scenery. It's funny that one site I was looking at for ARMHY last nite states the TA as Very Bullish. The TI's I look at sure aren't showing that. Actually, to see the price movement hugging the lower B-Band would indicate otherwise. Since I'm not buying or selling it doesn't really concern me. But if I were a buyer now......a better price "might" be on the horizon:))) Seriously though, at best ARMHY should move along with the market until next Quarter update or a major Fundamental change either in the industry or in the company.-Q
There is the canned version of TA and then there is the TI's that we use ourselves. The canned verion is what can put an individual investor at a disadvantage and is probably what gives TA the reputation it has today.Hey Q;I read your previous post; So anyway, I'll be around doing my share of rec-ing, but may not be posting quite so much. (Hopefully no major financial debates like "stock options" will pop up and cause me to digress to the point of being obsessive again:))-and- before you 'go-away' and start taking pics, fishing, etc., Please help me understand what you're saying in the first paragraph above.What do you mean by the 'canned version' and may I 'assume' (I just hate that word) you mean; Technical Indicators for TI's? I kinda hate showing my ignorance, but I just have to get a better handle on the use of TA... I'm one of those guys who think this stuff is pure nonsense... but after reading your 'prose' in this thread, something has struck a nerve with me.I read some stuff over the weekend from Nukejohn regarding his explanation of NJTA, including a ref. to stuff by inv44. (a 'former' fool - who evidently hasn't "re-upped")Would you mind terribly if I asked you to put a finer point on what you've explained above?TIA; ~hildy ;o)
...if you know a huge proportion of investors use TA, why wouldn't you know its basics so as to understand what this large segment might be thinking or doing?Didn't mean to kickoff a debate about TA, which I think has been discussed ad nauseum here and elsewhere, with probably very few minds changed one way or the other. I would agree TA is a factor that needs to be taken into account, if only because the market is a pari-mutual system and, as you point out, if enough people follow something it's going to contribute to the mix. (Of course, as soon as enough people are onto the game, it causes the rules to change.) For example, just because I don't "believe in" astrology doesn't mean I'm not interested in hearing what someone's sign is if they insist on telling me it. I'd just be more convinced if they could tell me MINE. The point is, if enough people have confidence in something that they alter their behavior accordingly, that can give it a sort of perverted reliability. I think TA works - or doesn't - in the same way. Remember, the chart, like the market, has no existence apart from the universe of traders that create it from moment to moment. So a "cup and handle" has no desire whatsoever to go in any particular direction unless, of course, enough people believe it does. Do you really ignore TA or are you just a "closet TA checker" just as a double check" before you buy?Since I don't trade much, I'm concerned primarily with fundamentals, not with the price du jour. But that doesn't mean I can afford to ignore the legions of traders, almost all using TA of some sort, in order to help determine when it's time to buy or sell. But again, it isn't TA itself that influences that, so much as the faith that people have in it. (I suppose that might make it a contrarian indicator of a sort.)But practically speaking, I would say TI: Yes, TA: No. (Thanks, quasie). Technical indicators are more indicators of what has happened in the past and what is happening NOW, rather than predictors of what's going to happen, and so, unlike TA, they have a sound basis in reality. Although, of course, they can be interpreted just as widely. I wasn't trying to dissuade you from whatever works for you, just pointing out how easy it is to prove whatever one wants to when the system you are examining is complicated enough. And how easily people can be persuaded: The human desire to discern patterns of order within chaos is extremely compelling, even when none are there. (Of course, patterns are often human artifacts, so if people say there there, they're there, at least for them...But let's not go THERE!)BTW, thanks for your kindness. This subject has touched off many a flame war! Now I'm off to read my tea leaves.-z.
IMHO, TA if followed strictly, applies a set of rules to investing that may improve outcome since it forces sells and buys irrespective of love and hate, fear and greed, and the other emotions that play havoc with one's investment decisions.Just one moment before the tea leaves! With all due respect to one of my favorite TMF-ers, I reread your post and I find this comment very telling, duma.If your motivation to follow TA is simply because it imposes a logical discipline on your investment decisions because you are wary of emotional interference, perhaps it could be helpful to examine this.There are all sorts of ways to impose rationality on your investing process, not the least of which is rigorous fundamental analysis. TA may make you feel more confident and allow you to avoid emotional bias, and that may indeed "improve the outcome". But I wouldn't make the mistake of giving credit to TA itself for that. (I don't mean to set FA and TA up as adversaries, but they are very different in their degree of basis in rationality.) I would suggest that far from being free of emotion, TA is all about the need to control, the desire for predictability, which couldn't be more emotionally-based. To the degree that other people's faith in it can be a (contrarian) indicator, it might be useful. But for the most part, I think one is better off, and far more likely to be successful, in examining one's own unconscious biases rather than getting involved in other people's.I'll follow my own advice now!-z.BTW: If it's control you want, fundamental analysis has the added advantage of being entirely within your own domain. (If your FA was wrong, you made a mistake, and you can learn from it. If your TA was wrong, you have a million other people to blame, and what can you learn from it? They might do the opposite next time!)
What do you mean by the 'canned version' and may I 'assume' (I just hate that word) you mean; Technical Indicators for TI's? I kinda hate showing my ignorance, but I just have to get a better handle on the use of TA... I'm one of those guys who think this stuff is pure nonsense... but after reading your 'prose' in this thread, something has struck a nerve with me.First things first. You must not be an accountant or "assume" would be your second name. I get in big big trouble making assumptions I have no business making-sometimes:)) By canned TA I was referring to the sites thet say "This stock is Bullish Short-Term, "That stock is Bearish Long-Term,and so and so forth. Technical Indicators can be helpful though if you know what they mean, the circumstances surrounding them and the way a particular stock may respond. They are helpful in entry and exit points of a very volatile stock. Try printing out a large chart with 5 or so indicators at 5 years, 2 years and 6 months. Cover up everything except the far left with another sheet of paper and look at the indicators to see if you can predict what might happen next to stock. Then move the sheet to the right slightly to see if your prediction was correct. Most of the time, there isn't a pattern. Maybe once in 6 months, you might be able to see a pattern develop for a particular stock and all indicators will show it. And of course, it will all be for nothing if there is a fundamental change around the bend either in the stock or in the market.I like Wallstreetcity for the presentation. They don't have as many indicators as some of them other sites, but I find them easier to compare by lining up the arrows. They also have in-depth explanations of what each indicator means. In reality, I think right now we are in an event driven market. On Bloomberg, the floor traders can tell you the event that just happened, the initial reaction of the traders and then the follow-up reaction as it happens (not prediction). That being the case, I just don't see how TA could possibly work on a day by day or minute by minute basis in the smaller market moves. However, I think stop-losses are the worst enemy we might ever have. Other than our own Bias--but that's another tale to tell. Trying to time the market is by far the the most risky of all the trading strategies. Unless we are looking for an exit to take profit they will bite us hard almost everytime. JMHO of course. -Q
Thanks Martin.Perhaps the reason that this thread hasn't resorted to flaming is a combination of the social etiquette this board most often enjoys as well as the fact that I am really not a TA zealot and am not offended by any challenges in any post. Thanks in advance for your friendly chatter. Very much as your subtle but unmistakable message of using what works for you, I am convinced that there are many investors doing very well utilizing TA as their primary investment guideline. Your original comment of the retrospectoscope advantage for ARMHY TA was in many ways predictable. Those who believe, try to see the "truth" in it and those who don't point out the rear view mirror analogies. You have done a fine job clarifying that while not a prime focus of your investment philosophy, you still look at it. I do believe that a large segment of the investment population follows TA.......it has been evident in so many series of eventualities most recently the 2001 October to December run up as well as the recent double top. I have found that TA advocates can and do reverse their position much more nimbly that those that use FA. One might conclude from that observation that the TA advocate may actually do better in a down or choppy market while the FA advocate might do better in a bull market. Probably too generalized a statement but perhaps you understand the point. IMHO, aligning FA with TA adds extra confidence than either alone. This board has pointed out some of the glaring weaknesses of FA and calculated DCF based on erroneous assumptions that the average investor could not be expected to avoid. But what if a reasonably accurate FA is accompanied by an opportune TA entry point......now that is taking advantage of every tool. As to seeking an unemotional method of investing.......yes......I do believe that emotion is a killer to returns. Holding a stock down to the pits just because one knows they are right…..a gorilla or whatever. Greed, fear, love, hate.....all deadly sins to consistent returns.It would seem some well respected authors such as Douglas and Weinstein have made similar comments. I will venture a guess that you have also developed predefined rules and maybe you are unlike most investors that repeatedly break those rules. It would seem that breaking rules is associated with lower returns. It is in that context that I mention the TA emotionless method.....if followed should be expected to result in superior returns to another investor that bounces from one emotion to another. You are correct that I am not really claiming this consistency has anything to do with TA....rather, it is the emotionless following of predefined rules. Forever open minded yet clarifying………….
If it's control you want, fundamental analysis has the added advantage of being entirely within your own domain. (If your FA was wrong, you made a mistake, and you can learn from it. If your TA was wrong, you have a million other people to blame, and what can you learn from it? They might do the opposite next time!) I would say just the opposite. In both types of analysis, it is you who is doing the analysis. So far, they are equal (assuming you believe there is validity to TA).Where you can start to lose some "control" in FA is that the information you are working with may be inaccurate or incomplete. You have to hope that the information you have is accurate, and that there isn't other information floating around that you don't have.Of course, anybody is free to blame anyone else at any time for anything. :-)
duma,Your original comment of the retrospectoscope advantage for ARMHY TA was in many ways predictable. Those who believe, try to see the "truth" in it and those who don't point out the rear view mirror analogies. I could just as easily take the position that your second sentence was equally predictable. It's predictable because it's consistent with a very similar same belief you expressed about people following my Front Office Gorilla Game.I really don't know why people have been following my reports, some for nearly five years. The reason I don't know is because I haven't asked them and I don't remember anyone telling me. Though I'm motivated by the possibility and even the probability that people have the capability of being objective about my reports in a way that they find advantageous, I don't presume to say why they follow it.My thinking is that there is nothing valid or credible in determining for others why people do the things they do. Any evidence you have about why people follow my Gorilla Game reports or why they respond to discussions about technical analysis is purely anecdotal. Ironically, your thinking might be as heavily influenced by the same biased, unobjective approach that you feel people are incapable of overcoming. But that's for you to decide for yourself, not for me to decide for you.--Mike Buckley
Ok Mike.It was a simple discussion and I seem to have somehow hit a nerve......forget everything I said..........just observing and paraphrasing a few books like Trading in the Zone by Mark Douglas, Secrets of Profiting in Bull and Bear Markets by Stan WEinstein, What Works on WallStreet by James O'Shaughnessy.Perhaps I am not very good at paraphrasing but as to how this whole thread somehow gets back to you and your Gorilla game thread....Your interpretation of my position is clearly flawed but I am not in to mixing it up with you so you have it however you like it.
Duma,Yes, it is (was) a simple discussion. If I have somehow offended you, that was not my intention and I apologize. No, you have not hit on a nerve. Not to worry.--Mike Buckley
Hi NPI folks:I was directed to your board because some TA related discussion was taking place. I will not get all into it on this board but for those who find the discussion stimulating, you might check out the debate at the FOTH board back in January 2001 after Bill Mann's article. The link to the board is as follows:http://boards.fool.com/Messages.asp?mid=14057246&bid=100129And there was some very recent discussion at the ab's Sensible Port board as well:http://boards.fool.com/Messages.asp?mid=18507350&bid=115649Note to Quasie:I just love some of your posts on this board (must be some common accountant type thinking)! :-)Now for the Plug: For those of you who enjoy fantasy, you might check out the Mermaid Board at the following link:http://boards.fool.com/Messages.asp?mid=18520428&bid=111782Best regards,LeBean :-)...who is just an old, down home, country bean counter.
Note to Quasie: ....(must be some common accountant type thinking)! :-)Thanks LeBeanCountiere for the compliment. The kindrid spirit must come from the torturous effect of those Accounting Instructors at UCSB:))) Especially Harry:(((I love this board because the guys here are all such fantastic (not fantasy) writers. (A "coveted" talent of most accountants). And I love science and technology and the effect of new technologies in the IT world. (And I hate those words "affect" & "effect" too)I'll have to check out that fantasy board. Fantasy-a much needed escape from the world of numbers:)-Q
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