I agree that it's desirable to be pro-active, rather than reactive, and that TA is in large part a reactive tool. A problem with using fundamental analysis to be pro-active, though, is that markets often are highly inefficient and require a long time to reward business value with market value. From an investment perspective, dead money doesn't bother me much, so long as I continue to feel that the investment will be rewarded over time. But from a trading perspective, I place more value on the ability to move money in and out of rising stocks fairly rapidly. I don't scalp stocks, daytrader-style, but I do at times ride a short-term trend for 7 to 15 percent and regard that as a good trade.
My ideal scenario -- what I spend most of my time looking for -- is what has happened with SPYG. I've had SPYG on my radar screen for a long time and finally decided to invest in mid-October. I liked the fundamentals and the growing market opportunity, and I "timed" it to hit the earnings announcement, which I figured would be good and thus would serve as a catalyst for the stock. So here I have had my money in place for about a month and am sitting on about 140% gains or so. And, for the time being, I'm sticking with SPYG despite the retracement because I believe that significant additional gains are possible within a time horizon that I consider to be "reasonable" (3-6 months).
I entered CNQR the same day I bought SPYG with largely the same time horizon in mind -- 2-6 months -- because CNQR was overly punished and seemed likely to have favorable customer wins and product announcements in the near-term future. So far, that has yielded good gains, and again I'm holding through a retracement because I think the company and the stock have more to offer within a reasonable period of time.
Fundamentals, TA, anticipated news: I don't really have a system of any kind, but tend to rely on all of these tools to varying degrees depending on what I'm hoping to gain from a trade. My ideal is to catch the 3-6 month hold based on fundamentals and news that will appreciate heavily in value. But I don't often find stocks that I feel will do that, so I look somewhat more to TA to find shorter-term holds (1-3 weeks) that I expect to yield more modest gains.
At some point, I need to think more systematically about what I do so I can get a better handle on what works and what doesn't. Someday! I appreciate the opportunity to think though some of these issues with you. |
