Forum Archive Index - February 2003

[Phaedrus <Phaedrus@techemail.com>]

Travis,
        I would like to refute the points you make. You state that I 
<<<<...give as proof of resistance an example of a stock that stopped at a 
certain point twice.>>>> Read my statement again. I claimed this was evidence 
of Resistance, not proof. Stopping at the same point many times would 
constitute proof.

<<<< The counterargument would be to show the chart of a stock that didn't stop 
at the same point twice, and there are thousands of these.>>>>
 That is not a counterargument at all! A stock that is continuing to make new 
highs doesn't stop at the same point twice, and as you rightly observe, shows 
no evidence of sustained resistance at any point. Most people call that an 
uptrend and there are indeed thousands of examples of these. Your 
counterargument is completely specious.

 You seem to have misunderstood the concept of resistance. It is NOT something 
that is always present. It means something if it is present, and it means 
something else if it is not. It is of particular significance if a level that 
has previously been respected many times is breached. To me it is self-evident 
that this indicates a change in market sentiment. 

<<<<Any method of analysis that works only in hindsight and does not indicate 
much of any consequence in advance is of very limited usefullness.>>>>
  Travis, that's three mistaken assumptions in a single sentence!
(1) The trendline break Sell signal shown on the chart was evident in real 
time. When TLS price action gives a Buy signal by breaking above the current 
downward trendline, that, too will be evident in real time. I will post it here 
for you when it happens, if you like - no hindsight required! This trendline 
has been in place for 3 years now, and has been confirmed on many occasions. 
Where, exactly, do you see hindsight as having been used here?
(2) This system indicates NOTHING in advance, and no claim of indicating 
anything in advance was ever made. I do not believe that anyone or any system 
can do that. This is a trend-following system - note how the exit was made late 
and below the peak. When the Buy signal comes, rest assured that it will be 
late, and above the preceding low.
(3) Very limited usefulness? I disagree, strongly. This chart is an excellent 
example of just how well TA can work. I built my TLS stake over the week or so 
when it first listed (acting on the basis of my trading rule #28 - buy anything 
the government sells). I sold on the trendline break, as charted. I have not 
held TLS for nearly four years now, but will seriously consider buying again 
when price action breaks above the current downward trendline. I know people 
that are still holding, having given most of their gains back to the market. 
Other poor souls have bought high, and been buying all the way down. Averaging 
down, Dollar-cost averaging. Very expensive mistakes here. How have you fared 
with this stock? 

 I was somewhat amused by your choice of quote from Ben Graham - from a TA 
perspective, you could hardly have chosen a better one to illustrate exactly 
what we are discussing. :-
"Market movements are important to (the investor) in a practical sense 
(CHARTS!!!) because they alternately create (depict) low price levels at which 
he would be wise to buy (SUPPORT!!!) and high price levels at which he 
certainly should refrain from buying and probably would be wise to sell." 
(RESISTANCE!!!)
 Why do you think TLS stopped rising at the price it did? Maybe there were 
enough followers of Ben Graham selling, at a level where they now considered 
TLS to be overvalued, to stop the meteoric rise of TLS in its tracks. Whatever 
the cause (and I believe that nobody could answer that question with any 
certainty) the collective market opinion was unchanged ten months later. At 
916, TLS again hit a wall of selling. In a year, TLS had moved from being an 
undervalued stock to being an overvalued stock.

 I am a simple, unsophisticated chap. To my mind, individual stock prices are, 
overall, either going up, down or sideways. I have found that if I buy and hold 
the ones that are in uptrends, I make money. If I buy and hold the ones that 
are in downtrends, I lose money. I have found that it is possible to make money 
by short-term trading stocks that are moving sideways between an upper and 
lower boundary in a trading range, though I do find this a little more 
difficult than trend following.

 Travis, it is apparent that we have some deep philosophical differences. In an 
attempt to ascertain just how deep, I would like to know if you 
accept/believe/acknowledge/admit/concede that stock prices sometimes move in 
sustained trends, and that sometimes they move sideways, ranging between an 
upper and a lower level.

        Regards,
                   Phaedrus.


_____________________________________________________________
Are you a Techie? Get Your Free Tech Email Address Now! Visit 
http://www.TechEmail.com

_____________________________________________________________
Select your own custom email address for FREE! Get you@yourchoice.com w/No Ads, 
6MB, POP & more! http://www.everyone.net/selectmail?campaign=tag

----------------------------------------------------------------------------
To remove yourself from this list, please use the form at
http://www.sharechat.co.nz/chat/forum/