Forum Archive Index - May 2002

["Brian & Fiona Brakenridge" <pohuenui.island@xtra.co.nz>]

Hi all,

 

Have any of you guys been in a situation where, in a public forum, you've express absolute, undying belief in a stance or a philosophy you hold, only to be presented with a level headed and logical alternative that deep down you consider might have some merit? Because many of us Kiwis have healthy egos it's a really difficult thing to do, ie. admit you might be wrong especially, again, in a public forum. 

 

Well I've been through an enlightening exercise in the past couple of months that has bought me to the conclusion that charts could well be a very interesting tool to add to the investment tool box. In fact I have been intrigued by what I have learned.

 

With the exception of an unfortunate and out of character message I posted late last year I have often tried to figure out if there is a correlation between the FA and the TA approach. In hindsight I am ashamed of that post because it did nothing at all to contribute to my own or others learning.

 

The exercise I have done is to go back in the archives 12 months or so and print out all the graphs Andrew C and Phaedrus have posted along with their explanations and then go into one of the charting sites e.g. www.bigcharts.com  and have a play around with drawing trendlines and identifying potential stop loss levels and then monitor the price and watch how the market reacts to certain points on your trendlines.

 

This would be an especially interesting exercise for those of you who don't have a strong view one way or another. I have in the past and still do, praise the Buffett approach and that is to invest from a business perspective. My philosophy has been to fundamentally identify a strong company, buy in and hold, with the understanding that logically over time it will grow and if I have analised it well enough logically it will grow well. That is the desired purpose of any company after all. But I'm now asking the question, can charts assist me with my buying decisions or possible situations where the stock has moved into a serious down trend.

 

Be very careful you don't get hooked up in this thing and start day trading tomorrow. It would be very easy to do and day tading with charts is a highly complex "science". However I now believe there is merit in at least understanding simple trends and applying stops even if like me you prefer to buy hold and accumulate.

 

I have been thoroughly interested and encouraged as I follow the discussion between Pahedrus and Gerry. My belief is that what motivates these guys is the simple desire to grow and protect their capital and while they use different approaches they both respect and accept the others view and don't concentrate their valuable time on trying to disprove the other.

 

With the help of these two and any others I'd like to learn more from the exercise I've just completed and see if I too can't figure out a better way to build and protect my capital and I'm proposing to use a couple of stocks that have been discussed in the past and ask Gerry and Phaedrus and others to contribute opinions and comments as we follow the stock's progress. This is in no way designed to prove one method or the other right or wrong. As Phaedrus has said in the past he is only right 6 out of 10 times and Gerry has also been openly frustrated when some of his stocks don't perform as he had hoped.

 

There are three stocks that have been well discussed and analyses both technically and fundamentally in the past, CLI (AU), BCA(NZ) and WHS (NZ). What I'd enjoy doing is keeping track of these three from a fundamental perspective and trom a technical perspective and ask people to contribute their thoughts as to what is happening with each stock maybe on a weekly basis. CLI is interesting because it is a stock that seems to have been grossly undervalued by the market for the wrong reasons but is fundamentally a strong company. BCA is also arguably a strong company that has been on a long term serious downtrend and it will be interesting to watch potential points where that downtrend might be broken and what might be a good entry point. Conversely WHS has been steadily climbing, is a strong company, but some would argue now overpriced. Will the market reach a point where it becomes nervous and the uptrend is broken downwards or will earnings catch up to where the market has priced the company and will it continue to grow?

 

I think it will also be interesting to look at a significant index and I propose the NASDAQ  or the S&P500. Great speculation as to how low these will trend down and whether or not the US is indeed in a recovery.

 

Phaedrus and Gerry would you be willing to assist in this exercise? Phaedrus whould you mind posting these charts with relative trendlines maybe with the axis extended so we can plot potentially important points to watch out for?

 

Sorry for this long post. It's been a while coming!

 

Look forward to positive and constructive comment.

 

Cheers

Brian