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Strategies & Market Trends : Technical Analysis- Indicators & Systems

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To: TA2K who wrote (3247)	2/10/1999 9:49:00 AM
From: Robert Graham	Read Replies (2) of 3325

I think you will find that most professional traders do not follow the fundamentals of a company. Perhaps they follow the news events that can relate back to the fundamentals such as an earnings report, only because news events have a short term effect on the price of the stock. Do not confuse LT investing and ST trading. In many respects they are as similar as night and day. This would be one of the biggest mistakes for you to make in your trading career. If following the fundamentals will make you more "warm and fuzzy" inside with the trade, then why not follow them. But in a short term trade, do not forget it is the technicals that will determine entry and exit, and not the fundamentals of the company behind the stock. In this case the fundamentals can provide and additional filter on top of a technical scanning for the type of stock you are looking for. With this said, there are some data items in your list that may impact how the stock trades. This would be the figures regarding the float, or more specifically the amount of stock that is available to trade. This includes consideration for insider and institutional ownership. Also short sales may be a factor depending on how high this figure is compared to the float. Earnings growth, or even more importantly, earnings momentum also can be important. Even though this next suggestions are not related to the fundamentals of a company, for instance I think you should consider some type of relative strength filter. Also select stocks in sectors that are performing well with respect to the market, and at least that are in an established uptrend. Looking at the daily trading volume and how this compares to lets say the 75 day EMA of the volume can also prove to be useful. IMO the secret to short term trading is identifying the stocks that will provide you with the highest probability for a thrusting action in price that you can trade off of and ideally the lowest probability of breakdown during your trade. There are different ways in identifying this type of stock. Looking for breakout candidates and playing momentum stocks are two ways to approach this type of trading. I do think the book by O'Neal is a must read for you. Just my thoughts on this subject. Bob Graham

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