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Non-Tech : Knight/Trimark Group, Inc. -- Ignore unavailable to you. Want to Upgrade?

To: Joseph Silent who wrote (2398)	7/15/1999 3:01:00 AM
From: Raymond James Norris	Read Replies (1) \| Respond to of 10027

Yet, I continue to see "probability 1" predictions based on graphs, earnings and all other kinds of hobgoblins. :) I beg to differ. I offer my charts because not many here do. I could just as well offer my fundamental opinion of the company but that doesn't add as much to the discussion since most of you have torn up the numbers. The factor is there but I'm not discussing it hear. I'm well aware of NITE's high inside ownership, its sequential earnings per share growth as well as year ago period growth, revenue increases, NITE's competitiveness in its market, its strong industry group, its 69% historical growth rate, 40% return on equity, etc. etc. etc. The link I provided which gave a technical chart and discussion of NITE was accompanied with a look at the company's fundamentals as well. That is, making statements about a stochastic process AS IF the process was deterministic This is the fallacy many people harbor against Technical Analysis. Technical analysis does not predict anything. There are no deterministic methods used in it. All it does is determine which is the dominant force and then applies an age old physics law (the law of inertia). That is, the stock should continue on its path until it meets an opposing force. Stochastics and the like simply tell us the likelihood of when that opposing force will approach. So they do not predict anything. "There's a 75% chance of breaching resistance at 65". At least one can assess risks here. It's difficult to quantify risk in any model. The best technicians can do is look at all relevant indicators and see whether the majority are pointing to a breakout or not. We don't claim to make every call right - we don't have to. We need only to be right the majority of times to win in the long run. The reason that TA has ALL kinds of indicators is because no indicator works all the time. This is false. Would you mind if I said that earnings measure a company's solvency? Of course! Because it's not true! Just as what you said has no factual basis. The reason that TA has many indicators is because they each measure different things. Perhaps you're familiar with validity testing in any type of experiment one performs. Does the indicator measure what we say it measures? There are not that many indicators to TA anyways. I have maybe at most 15 in my charts program. I have one to measure volume, another to measure prices compared to themselves, others to measure prices versus other companies, etc. Each indicator measures something different. The key to being successful is being able to know when to use which indicator or rely more on one indicator - that is, being able to know when one aspect of a chart is more important than another. More importantly, no one knows when an indicator works and when one doesn't. Yes, Technical Analysts do. Non-Trending indicators work when a stock is not trending and trending indicators work when a stock is trending. Now that wasn't so hard. Technical Analysis in some respects is no different than fundamental analysis (I know you must hate to hear that). You can look at a company, see super earnings, sales, cash, whatever and still be wrong on the stock. Perhaps you overlooked the company's profit margins? Perhaps you overlooked the company's heavy reliance on one customer? Who knows, there's a host of things you could have missed. The savvy fundamentalist is the one that knows when to rely heavily on which key statistics and which ones aren't as important. Many people have trouble with normal distributions, standard deviations, Bollinger ands and even exponential averages. Technical Analysis does not require a math degree though it could help. Even if one does not understand in these areas, I'm sure people wouldn't mind hearing opinoins of others who have some understanding in the areas. Conservatively Yours, Raymond J. Norris