Technical Analysis

[luck]

Wondering if anyone recommends any approaches, indicators or books for technical analysis? 

 

All of my investing is fundamentally driven, but to enter and exit trades in value stocks, thinking it might be beneficial to learn a little bit more about the technical analysis side of things. 

 

From the books I've read, most research indicates that technical analysis is not that effective.  However, a few mean reversion tools such as rsi(2) oversold indicators do have some positive studies from what i remember.  SAC Capital uses the DeMark indicators it seems.  I also read a research paper a few months ago discussing positive results related to a study of the 50-200 moving average crossover.   

 

Thx in advance for your perspectives.  Happy new year to all!

[Phaceliacapital]

I started my investing career by studying TA so maybe I should kick this off:

 

When I determine the IV of a certain company I check its historical price and try to determine (often easy observable) where the TA have put their stops/entry points. These points are usually based on the resistance lines, which can be on the upside "ceiling" or the downside "floor". Once they go through there is most often increased buying, selling power. This is typically around the even numbers like a price of 5 7 10 or something even + 50 cents, so 5.5 7.5 etc, the increased technical selling power provides a lot of room for people who actually know what they are doing (us) to enter at bargain prices.

 

I also look at volume histograms just to get a feel of the market

 

+

 

I also look at the Death Cross. This is where the 50DMA crosses the 200DMA on its way up, or down. This is actually a TA phenomenon that I still attribute some importance too (qlso mostly for entrance points). When the 50 crosses the 200 on its way up you can typically expect a lot of upwards movement and vice versa.

 

All the rest of the indicators are fun to know if you want to lose money

[value-is-what-you-get]

Technical analysis is price-based and is an attempt to predict future prices based on the pattern of past prices.

 

It is a guess. 

 

If you have an idea of what the company is worth, and you see the market pricing it at a discount with margin of safety, there is no need to make guesses or predictions because you are confronted with a fact.

 

That said, there are enough TA proponents/software packages etc that the group as a whole does affect price movements on a short term basis but value shines through over time!

 

I like what TA based price action does to option premiums from time to time too!

[boilermaker75]

Here is a post from a poster I know some of you may know from a couple of different Yahoo groups, Cougar, on the topic of technical analysis. When Cougar ran his own private message board I was fortunate to be a member for a few years.

 

http://finance.groups.yahoo.com/group/chucks_angels/message/8964

[Palantir]

I don't do TA, but I do like to pay attention to momentum. If I think a stock is cheap....but it has surged to a high, or if it is falling rapidly....I avoid. I've started experimenting with stocks that have surging momentum (FB). But it is better to take diversified positions.

 

Furthermore, with many high quality growth stocks, if they dip from time to time, they may be slightly above your target value, (I want to buy at 46, IV at 60, but it's trading at 48) I think it might be a good idea to forget about your IV if a high quality growth stock comes "close", how close is a judgement call.