Forum Archive Index - August 2002

[Phaedrus <Phaedrus@techemail.com>]

 It is surprising just how similar the charts of many stocks can be. The stocks 
plotted below all went from September lows to similarly peak over a relatively 
short time span. All are now in clear downtrends, and still falling.

 What can we deduce from this? At the very least, the following possibilities 
are suggested :-

(1) The perceived safety of diversification gives no protection from major 
market movements, if the majority of stocks tend to follow the same major 
trends.
(2) If diversification does little to cushion major market falls, it is 
therefore unwise to be fully invested at all times. 
(3) When you buy and sell is at least as important as the choice of stock, 
maybe more so.
(4) The use of simple trendlines can be very effective in timing exits from 
established trends.
(5) The price movements of all of these stocks have been very similar, with all 
of them responding mainly to the perceived macroeconomic situation, perhaps as 
represented by the Dow.
(6) The charts are all broadly similar, in spite of the stocks having widely 
varying underlying fundamentals.

             Phaedrus.

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