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Strategies & Market Trends : Piffer OT - And Other Assorted Nuts
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To: Cheeky Kid who wrote (33495)5/15/2000 6:59:00 AM
From: Atin  Read Replies (2) of 63513
 
The reasoning behind TA is actually quite simple. The fundamentals of a company do not change day to day -- but the stock price almost invariably does. Something else besides fundamentals *must* drive this -- and that something else is the amount of buying and selling people are doing, for whatever reason. Just as the value of a house doesn't go up or down just based on its "fundamentals", the value of a company's stock doesn't go up and down just based on the fundamentals. There is a supply and demand equation that comes into play and TA just tries to measure this supply and demand.

Yes, usually good companies with good fundamentals also have the supply and demand in their favor, more demand than supply and the stock price goes up. Whenever the supply becomes more, the stock price will tend to go down. TA is just the art of measuring supply and demand. I call it art because there are no guarantees in TA either, just like there are no guarantees in fundamental analysis (after all, there would be no earnings surprises if fundamental analysis was infallible, and the analysts wouldn't have so many different estimates on things). I tend to think you really need both -- fundamentals tip the scales in your favor, but TA gets you a good price. There are somewhat different objectives and time horizons for the people who use them. And most people I know tend to use both.

Use whatever tools you have at your disposal, this game is hard enough as it is! This isn't a religion after all, even if practitioners seem to make it so.

-Atin
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