... I personally believe that too many people are now following technicals for anyone to make money off of TA.
Don't underestimate mob psychology. I TA'd (no fundamental analysis at all) one of my accounts from October 96 to October 97 and made 87%, including bad trades and commissions. I wasn't comfortable doing it in direct contravention of professional analysts' upgrades, downgrades, and earnings announcements, but I did it and it proved to me that TA does work.
I rationalize TA as follows: people say things and people do things. What people do (i.e., reflected in the stock price) is far more important than what they say (i.e., upgrades of a stock while they sell to the lemmings who believe them).
TA is not tough; take any stock, particularly one in the high-tech field that is heavily traded (QCOM springs to mind). Run a chart and superimpose the 50-day moving average on it. Now, with the benefit of hindsight, pretend you had bought whenever the stock decisively crossed the moving average to the upside, and had shorted when the price fell below the average. Even allowing for missing the absolute tops and bottoms by a few points, you still would have caught THREE major moves (April from 54 to 45; September from 51 to 63; and December from 60 to 54). A more aggressive trader would have tried to catch a few of the smaller moves. With conservatively-placed stop-loss triggers, you could have done very well. Try it with ANY stock. It works much more often than not.
Another experiment; watch any stock when it falls below its 200-day moving average by 10%. It almost always falls considerably further before recovering. That's where CPQ is now. I expect one more feeble test of the 200-day MA before it drops heavily. Look at the charts on AMAT, COMS, SUNW, or AGPH. The 200-day MA is what the institutions watch for long-term plays.
Paper-trade a few stocks for a year using these simple guides, and let me know how you do.
RS |
