Forum Archive Index - November 2002

[Phaedrus <Phaedrus@techemail.com>]

The attached chart of BCA shows how the use of simple trend indicators keeps 
you out of weak stocks. 

Trend indicators only work if a stock is fact trending. Any attempt to use 
trend indicators on stocks that are not trending, gives a string of useless and 
contradictory buy and sell signals. It is easy to see if a stock is trending or 
not from a quick look at a chart, but if you want to quantify this, the ADX 
component of the DMI system does just that. If the ADX is above 25, the stock 
is trending, below 25, it is not.

 BCA was in a downtrend, then went into a trading range. These are usually a 
continuation pattern, and so are usually resolved in the direction of the 
original trend. That is what happened here, when BCA fell below its trading 
range and resumed its downtrend at the beginning of October.

 The two trend indicators plotted here (DMI and a Moving average) have kept you 
out of BCA for nearly a year now, and we have yet another excellent example of 
a stock showing vey clear technical weakness well ahead of any specific 
publicly available bad news. You don't need to know the causes of a downtrend 
to know that one exists.

 As Ruth quite rightly states "the most crucial part of economics is human 
action."  The price chart is simply a graph of human action. People have been 
selling this stock down ever since it was listed.

                   Phaedrus.

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