Forum Archive Index - June 2001

[Phaedrus <Phaedrus@techemail.com>]

Pedro,
       Good questions.
a) The trendline seems to give the earliest sell signal ? Is this generally 
true?
A trendline is only one way of monitoring trends. At the end of any clear 
uptrend you would expect a cluster of signals from an assortment of trend 
indicators. The order in which they appear would depend entirely on the nature 
of the end of the trend. (sudden, gradual, etc.)

b) The trendline and the moving average only have sell signals ? Is this 
correct?
Trendline Yes. Moving average No. A Buy signal is generated when the price 
moves from below the ma to above it, a Sell vice versa. If you look at the 
period Nov 98 to March 99, you will see the price repeatedly crossing and 
recrossing the ma, giving a string of alternate Buy and Sell signals. This is 
because the stock was not trending then, but was in a trading range. These 
signals would all be ignored, because none of the other indicators being used 
gave any confirmation. What you are looking for is agreement between several 
indicators. You would never act on a signal from a single indicator in 
isolation.

c) The buy/sell signals of all the others seem quite timely ? Is this generally 
true or is this an ?ideal? stock for showing this type of analysis?
Depends on what you call timely. The Sell signals at the end of 1996 were 
spread over six months, from the Qstick in April to the PFE in October. A very 
definite, clear end to a trend will generally give a tighter cluster of signals 
than a trend that tapers off very slowly. 
Any stock that is suitable for holding long-term would fit well with this 
approach. By my definition this would be one that tends to trend up in a steady 
fashion over longer periods of time. The initial uptrend lasted three years, 
and EBO has now been trending down for about a year.
These long slow trends make it a good candidate for trend trading, but there 
are plenty of others.

d) Can you post a couple of charts (of a stock such as TEL?) one with a short 
time frame and another of the same stock with a long time horizon?
Could do.

e) Is the ?success rate? of buying & selling using tech analysis measurable in 
percentage terms ? eg >80% ??? 
Of course. Any particular trading strategy can be backtested on a specific 
stocks historical data. Any system that has proved unprofitable by backtesting 
is certain to lose money if you are foolish enough to actually implement it. 
While the converse is not true, strategies that give excellent results on 
backtesting over many years data are more likely to be profitable than those 
that performed poorly, historically. MetaStock generates all the statistics you 
could ask for when backtesting. They include average win and loss, number of 
winning and losing trades, average length of win/loss, most consecutive losses, 
brokerage paid, buy/hold annual % gain/loss , annual % gain/loss, system 
drawdown, and many more. Comparison with buying and holding is very important - 
if you can't beat buying and holding, you shouldn't be trading. 
          Phaedrus


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