I'm a "fundamentalist" but have learned to be aware of TA because so many people trade off of it. In certain cases, TA works as a self-fulfilling prophecy: a few people toss in money, the charts blip, and the masses charge in behind the vanguard. This may seem ridiculous, especially when the technical moves are divorced from fundamental analysis, but facts are facts. In this market, momentum very often begets momentum.
My basic rule of thumb is: invest on fundamentals, trade on technicals.
I bought SPYG to hold for awhile, based on my perception of the information-appliance market and SPYG's fundamentals, so I haven't even looked at a chart for the stock. TA might be helpful here if you're trying to time specific entry and exit points for short-term trades, because some of the mo-mo crowd has been playing the stock, but my approach to SPYG has been to ignore the stock and focus on the company -- i.e., to overlook the day-to-day price action in order to remain focused on the fundamental factors that brought me here in the first place.
By the way, if you want to see where TA really rules, watch Treasuries, index options and futures, and commodities when there's a news vacuum. Trading can go on for astonishingly long periods of time based on chart patterns alone. I wonder sometimes why institutions even bother hiring human traders. |
