Forum Archive Index - April 2002

[Phaedrus <Phaedrus@techemail.com>]

Barry,
      This chart of TLS illustrates beautifully some of the basic concepts of 
TA. It shows long-term trends, within which are medium-term trends, within 
which are short-term trends. It shows a trading range, and Support and 
Resistance levels. It shows the value of monitoring your stocks, no matter how 
good they are. It shows how the use of TA does not necessarily lead to 
excessively active trading. In well over 4 years, there is but a single 
long-term signal on this chart. A long-term active investor would be waiting to 
buy on the break of the downward trendline, having been out of this stock for 3 
years now.

Geoff,
       You say "I ... constantly remind myself not to fall into the trader or 
chartist trap". Where do you see the trap in this chart? A much greater hazard 
for you would be the Buy and Hold Regardless trap. No stock is so good that it 
goes up forever. You must surely monitor the performance of stocks in your 
portfolio, even if only weekly or monthly. Aren't charts the best way to do 
this?
  You further state "Fundamentals are the only thing that truly matters when 
investing, not candlesticks, a line on a piece of chart paper, or a hunch". The 
reason fundamentals are of interest is that we know that sooner or later these 
will be reflected in the share price. In other words, your real interest is in 
the share price - you are using fundamentals to select sound stocks that you 
hope will appreciate in price. What controls price is market sentiment. Sad but 
true. TA is the study of market sentiment. A stock is only worth what someone 
else will pay for it. 
 I would argue that the only thing that matters is that rising line on that 
piece of chart paper. After all, it is simply the picture of what happens when 
you get it right, and an undervalued stock with good fundamentals is steadily 
revalued by the market. 

   Regards,
             Phaedrus.

PS:- Are you the same Geoff that asks "Can you suggest a few websites that 
provide data for charting and analysis, or even a book?" and states "the chart 
for VTL certainly displays trends etc that without charts are not so apparent 
to the average investor like me" and asks for charts three at a time? I'm happy 
to oblige, but wonder why you ask if you believe that fundamentals are the only 
thing that matters. 

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