Hi Shaw,
What is your take on reading small cap charts (ie pennies/some thinner ones that can be manipulated on very small volume)? On a scale of 1 to 10, how valuable do you believe TA is???
hmmm... interesting question. No question that on the 'little ones' the price/volume & the charting indicators that are based on price & volume can be manipulated. I have seen many times on market depth huge bids that I have thought acted as a floor pulled with the immediate result that stops are hit as the prices swoosh down until a large cross appears & then price heads north to where they were before the cross occurred. At other times, on market depth, I have seen using BKP.to as an example, where huge bids & ask 'box' in the price in a very narrow range until the buyer or seller accomplishes their task. (Note: I don't consider BKP.to as a penny), but I found it kind of interesting to see that kind of action, when the initial hostile bid (@ a low price btw) came in from Hunt.
I found it very helpful to use very long term trends (3,5 years or longer) on penny stocks in the resource sector. The chart action has an almost seasonal cycle to it.
So to summarize, on the pennies I would be very leery of depending completely on T.A. I do some fundamental analysis to try & determine the underlying value of the company. Note for short to intermediate terms trades I do a perfunctory D.D., ie: news, annual reports, shares outstanding & book value of the company (if possible & if I have the time) sector rotation analysis (rising tide carries all boats in that sector).
T.A. IMHO does not carry the same weight for pennies that it does for the bigger cap. companies.
Regards,
Peter |
