Forum Archive Index - November 2001

[jerrold poh <jerm@musician.org>]

Sorry for the long post.  It's been sitting in my outbox for awhile and
I was wondering if I should mail it or not ... and I guess I might
aswell .. it might be educational .. despite some flaws.


> Hi Nick....This bothers me.    Why would you see that chart 2 is
> more likely to go up?  I think your answer here might reveal the
> reason for the division between TA and its detractors. 

If you look at the first chart, you're buying in, and then praying that
the price would do something, and then sell later.  (Wishful thinking).

In the second chart, the price is going up. 

Not sure about his, but I think in the NZSE, there is a system in place
where prices can't shoot up to ridiculesly high values overnight,
(unlike the NASDAQ), so usually, it takes awhile for the share price to
reach an agreed value.

Ie, Frucor announcing bad profit.  Lets say an institution gets wind of
this, and says, "well, the dividend isn't going to be big this time
round, lets get our money out of here and into I dunno ... FFS", so they
start selling. 

Now, they can't sell all their FRU shares at once cos they'll flood the
market (part of the system?), so they sell parcels at a time.  The price
starts to drop

Now, a week later, a TA person is now sitting at their computer, and has
noticed, that after a week, their FRU shares have dropped 10%.  "Hmm,
it's broken the trend line", they say, and they sell.  

What's happening here is that they've noticed that the wave that they've
been riding has broken early, and they're getting alot of whitewash, so
they flag it, and wait for the next wave.  They don't know how big the
next one will be, or how long it'll take to reach them.  All they know
is the waves are coming in messy, and messy is bad.

Note, they're not predicting anything, they're just seen that they've
got a dirty wave, and they don't like dirty waves.  

As Phaedrus said one time, his system fails 40% of the time, and when it
fails, he's out as fast as possible.  When his system does work though,
he rides the wave until it breaks on the beach.  

As for why TA people think the price is going to go up?  They don't, but
if you notice in the example, it was a chain of events which made the
share price go down.  We (the small shareholders), have no idea what all
the institutions are doing, and therefore can't tell how long it'll take
before an institution finishes selling their holding in FRU.  

We just ride it, and if they take two weeks to sell their FRU, we'll be
off for two weeks, if they take 2 days, we'll get back on after two days
when the flood of shares is stabilise (and hopefully make a profit).




Jerrold



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