Ok, Nemer...do you want to argue about the semantics of "value"? lol
If I accept the definition of "value" that you seem to be using to describe what the author of that article meant, I'd have to say that his opinion doesn't have much value (pun intended) because he would only know that a stock had value after the fact. In the stock market you have to determine if something has "value" before the fact. You won't make any money if you pull up a chart after the fact and say that a stock had value two months ago since it went up 50% during that period.
First let me say that I am a proponent of technical analysis. However, I don't use it to predict stock prices, nor do I think that anyone can use it that way consistently. I have often said that I use technical analysis to try to lower my risk and increase my profit potential, thus lowering my risk to reward. That said, I have opted for more fundamental analysis lately because I don't think that technical analysis works well when a market gets to an extreme like we have today. If the mo-mo continues, then TA will work. If the market gets choppy, which is one indication of a bottom, and which often happens when an equity gets to an extreme, TA doesn't work well because you get whipsawed all over the place.
As you said, one definition of value is today's market price. However, that definition doesn't help you decide to buy, sell, or hold. You can only make that decision based on whether you think the market value is above, below, or equal to what the value should be. I don't see how you can use TA to answer that question, because TA is really about following trends or using chart patterns either to lower risk or predict moves before they happen. TA doesn't have anything to do with value as I am defining it. You can only determine the value as I'm defining it based on FA. The most difficult aspect of FA is predicting what the future fundamentals will be. This is where TA can have an advantage over FA, but like I said, when emotions are at an extreme, you can't believe the TA either. No method is 100% accurate, and both TA and FA have their flaws. |
