Mornin' Ed!
Hey, I have the sneaking suspicion that I started this little conflagration by blasting Mike.com. I really should not have done that, and I was willing to apologize.
In any case, it's over.
Now, on to your post. It appears that you may not have fully understood the brand of TA that you ridiculed. There are some indicators used in Point and Figure that are quite different from other forms of TA. The analysis that Lost1 did on the stock was:
a) in response to a question from someone else, not you.
b) void, if you will look closely, of any prediction of future events.
c) accurate with respect to P&F.
With all due respect, I must also add a few comments of my own.
Specifically, I want to discuss your statement:
Guys like you give any kind of TA a bad rap... This is not to be construed as a defense of Mike or IATV... but a defense of legitimate TA which yours is not, not, NOT
The first part of your statement is a weak and inaccurate generalization, and I suspect that had I not flamed Mike.com, you would not have posted that. So, Mike.com, if you are reading this, I apologize for my post to you, it was out of order.
Now, Ed, you say your post is a defense of "legitimate TA" which [P&F] is "not, not NOT."
Point and Figure Charting has been around since before you were born. While it is true that the ratio of people that understand and use P&F compared to those who understand all other forms of TA is small, it is also true that calling P&F "illegitimate" is absurd.
Your post implies that you are defending "legitimate TA" against this evil form of blasphemy called P&F. I suspect you spoke in the heat of the moment, but if you really believe what you wrote, you are, with respect, missing something very important.
P&F is used by many very astute technical analysts, "guys like" Lost1, not the least of which is Tom Dorsey, one of the most respected money managers on Wall Street. Many traders on the floor of the NYSE can be seen at various times during the trading day filling out their P&F charts. The people on this thread, including myself, find the P&F method to be quite valuable. You can't argue with facts, and the fact is, Tom Dorsey makes good calls and good money for his clients. If he didn't, he wouldn't be where he is. Money managers are only as good as their last call, and Mr. Dorsey has been around for several quarters.
But that is beside the point. The truth, as I am sure you are aware, is that any form of analysis is neither "good" nor "bad" in and of itself, it is totally dependent upon the application of the principles. No form of TA (or FA for that matter) is always an accurate prediction of future events. Humans make the call, and humans bear the final responsibility, not a computer program, a chart, a 10-Q, or a press release from the company. If something works for you, then it works for you, and that's really the end of the argument. If you pick winners by lining up stocks that match the names of constellations visible at midnight outside your house, and it works, then God Bless You, carry on and make money.
Finally, your post claims to be a defense of "legitimate TA". I won't argue with you regarding the legitimacy of P&F, but you offer a couple of examples in defense of "legitimate TA" that cause me to question your understanding of it. Also, you do a disservice to anyone that uses P&F successfully, as well as the method itself, which I can personally assure you is, in fact, quite legitimate. (Once again, I remind you that Lost1 predicted no future events in his post, but simply pointed out the significant occurrences on the chart from a ‘P&F' point of view.)
suddenly broken out with very large volume, mega percentage price rise, and a huge increase in market makers
This says only that the stock has ripped after a long base. As far as I am aware, this signal (sans the market maker increase, which I doubt you chart, so technically it is a fundamental indicator and has no place in your statement) was popularized by Ted Warren's book, "How to Make the Stock Market Make Money for You", and you are quite right, it is a valuable TA signal. Looking at the weekly chart, which is what Warren did on his signal, we see that Warren would have seen the quiet action in late 97 and early 98 as a sure sign the stock was ready to rip. The breakout above 4 in January of this year was his buy signal. Using his calculations, the stock would be good for a 200-300% rise, putting his target price at around 12. Any move above that, accompanied by a chart that shows a rate of climb higher than a 45 degree angle, would tell him that the stock was possibly overextended, and a break down from the trendline would signal a sell point. Since we don't have that signal yet, (not enough to chart on the weekly bar) we don't have a sell signal, but we certainly have a "heads up" sign. Simply stated, Warren would be in the stock and holding it for a sell signal that has not occurred.
hasn't really paused for a consolidation
This is quite accurate according to Warren, and this statement makes me think you are familiar with Warren, since that is precisely how he would describe the action on the chart.
Let's look beyond Warren and see if any other "legitimate" TA can give us a further clue. On the daily chart, we see the most recent close above 16 is touching the short term trend line. Further, the first part of Tom DeMark's Sequential Sell Signal has formed. Also, we can see that the stock has had a significant run up on high volume in the last 5 sessions. These three indicators suggest that short term, the stock has topped out, and is in fact forming a consolidation at the 17-20 area.
An entry here would be a much less safer bet on a risk/reward basis than an entry prior to that runup. All we can do now is wait and see if the stock backs off significantly, indicating that the spike was primarily a short squeeze over the last 3 trading sessions (which is what I suspect personally) or if it is, in fact, getting set up to go higher. Without the benefit of further action, I know of no form of TA that can give us an accurate clue as to the price of the stock in a month.
Shorter term, using what you call "legitimate TA", I can make a qualified guesstimate as to the action in the next few days. I think the stock has been overextended due to a nasty short squeeze, and it will back off and base out short-term at 17 and change. I think a bunch of folks have made some serious money on this stock, and they will be selling it. I think it will dip from 17, indicating to anyone that likes the stock that it is "cheap" and giving a false buy signal. Then I think it will run up a bit and then tank. I look for a bottom of around 12, and down from there. Of course, if it consolidates at 12, I would be forced to re-evaluate.
Once again, Ed, I'm not saying I'm right, I'm saying what I think using "non-P&F" TA. It's a tough call technically due to the spike; all the oscillators are pegged out, so we can't really see much. We must go to other signals that are not pure TA and may not fill your definition of "legitimate".
You may ask me, "So Tastes, why bother with the P&F if you're such a smart guy?'
The answer is this: after studying TA for 21 years, and just recently being introduced to Mr. Dorsey's book, "Point and Figure Charting", I can tell you in all sincerity that the principles in the book outline the best overall method of making money using technical analysis that I have ever read.
If you want to find out more about it, I encourage you to read the book. If not, that's fine by me too, but as Andy Warhol said, "Don't knock it just because you don't understand it."
I think it was Andy Warhol, maybe it was Andy Rooney.
Anyway, let's call a truce here. I'm new to the thread myself, and I'm not looking to piss a bunch of the regulars off too much, because I'm trying to learn this stuff myself.
Fair enough?
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