[ TA, FA, and other thoughts ]
Hi Scott,
After completing that post, I too realized that perhaps a tendency was developing for me to move closer to TA. Today's incident with QSound, however, doesn't change that; it merely serves to strengthen my belief in not trading against the trend--even if the business case remains compelling; FA and TA can be balanced, and I continue to believe that the multi-pronged approach has greater advantages than pure-FA/pure TA-approaches.
I continue to believe that the analyst who brought my attention to QSound is correct about the future potential of the company. However, the timing of the entry was too early. Right, but early.
In what order do you place TA, FA, business case, market economics, market psychology currently?
Hmmm...
Amazingly enough, the first consideration goes to the trend of the issue under examination.
I was/am so convinced of QSound's potential that I did not even heed the trend concept when I began my recent acquisition. In Q's case, I bought based on the expected future business condition without regard to the trend. I got burned, which makes the hierarchy simple to set up: Trend considerations first before buying based on the business aspects of the stock.
But it is the business consideration that will make me a holder of the issue when the TA may not fully confirm the underlying strength of the company's business. It also helps filter the occasionally fuzzy TA picture, particularly if the issue in question does not have a high average daily volume. All this assumes that the trend is not headed down.
As for market economics and psychology, I try to keep an eye on both, as it influences the extent to which I will leverage my position for speculative plays. As an extension of this concept, it also influences my asset allocation (i.e. the percentage long, short, or in cash, etc.) It also plays a role in influencing my expectations of the strength and duration of upward moves in the issues I follow.
Nothing here is set in stone, however. As my exposure to the market continues, my ideas will surely evolve, and the ideas outlined here may no longer take the same shape or form in the future.
Regards,
Rainier |
