I don't want to give anyone the idea that I'm a true
believer in TA. I, too, am a skeptic. However, having
tried the I'll buy on instinct, sell on instinct method,
and not found it to work too well, I started to use TA.
It works best with blue chips with lots of stock out,
with a product that is being sold, etc. because just like
an oil tanker, a big company gets moving in one direction
it's likely to keep moving in that direction for some time.
When it shifts direction, it is noticeable. Penny spec
stocks do have trends but they can be disrupted by even
the smallest events. Their price is often dependent on
nothingmore than the next drill results. Or an announcement
that there is going to be drilling. Or that there's been
a PP and now there'smoney for drilling. That's why TA
will work for a time and then go all to hell with a rumour
or news.
As an example of how TA has worked for me is the following:
I got a recommendation to buy Transalta. I've been picking
up dividend stocks and this one is paying a decent dividend.
The pitch sounded good. However, I said, I think I'll check
the chart. Take a look at it. Transalta is in a wicked
downtrend. Right now the stock price is below the 20, 40
and 200 day moving average. All other indicators are
negative. At some point I'll end up buying it because I think over the
next few years it will do well but I won't buy until the
TA indicators show that the trend has reversed. I'll look
for reversal indicators such as a double or triple bottom.
I won't get or even try for a buy at the abosolute bottom
That's a sucker's game. But I'll try to get my buy after
the trend has reversed. I also will study the companies
fundamentals. Those will tell me why it is in such a
downtrend and will give a sense of whether the reversal
is justified. |
