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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Gary Burton who wrote (25799)	10/28/1998 9:06:00 AM
From: Wildstar	Read Replies (1) \| Respond to of 70976

The reason I swung over to TA was mainly because i spent many years with the mistaken impression that the current fundamentals determine a stock's near term trading pattern as in if they're good the stock must go up etc.The trouble with that approach of course is that in a liquid highly researched stock, one is dealing with in effect perfect information and the buyers and the sellers know exactly the same thing--ie the price already reflects the information so why bother with FA at all. I'd have to disagree. Like you said, the buyers and sellers know the same thing. The difference is in how you interpret what's already known to everybody.

To: Gary Burton who wrote (25799)	10/28/1998 1:31:00 PM
From: Jacob Snyder	Read Replies (1) \| Respond to of 70976

Gary: re TA vs FA: re: "The reason I swung over to TA was mainly because i spent many years with the mistaken impression that the current fundamentals determine a stock's near term trading pattern" You're right, that is a mistaken impression, but it doesn't mean FA is useless. A more accurate statement is: Long-term fundamentals, (in a company with stable management, and a long track record) determine the stock's (or sector's or market's) long-term trading pattern. Using FA to try to guess day-to-day (or even month-to-month) stock movements is useless. A 3 to 5 year smoothed average of EPS growth correlates closely with a 3 to 5 year smoothed average of stock price growth. The correlation doesn't show up if you use a smaller time frame. re: "in a liquid highly researched stock, one is dealing with in effect perfect information and the buyers and the sellers know exactly the same thing--ie the price already reflects the information so why bother with FA at all." I disagree completely. All information is not available to everyone at the same time. (When Intel decided to delay Merced, they first told their customers, and the news leaked out slowly, and the stock had already made a large down move, before the news was in the WSJ. INTC is the most liquid/researched stock there is. This kind of thing happens every day.) And even if it were (perfect timely info), bears would focus on the bearish news, and bulls would focus on the bullish news, and act accordingly. (You see that process happening every day on this thread.) It takes obvious, repeated, info that can't be ignored for people to change their basic stance about a stock, or the market. This takes time. re: "TA types really couldn't care less what FA types think of TA. And I suppose vice versa" I'm with Kathy on this. I use FA to decide which stocks I'm willing to buy. I use value analysis to decide the general range of stock price I'm willing to buy at. And I use TA to pick an exact buy price. For instance, I used TA to pick the following buy points: bought amat when the stock hit 26 recently (hit 22.5 a few days later), bought nvls puts when the stock hit 29 (was at 41 a few days later), almost bought cymi when the stock hit 15 (reached 6 shortly thereafter). The problem with TA is that, when it's wrong, it's badly wrong. When the pattern changes, it tends to change a lot, and very quickly. I agree with you that TA is group psychology, or "the madness of crowds". Of course, even insanity has its patterns.