Comments & My Response to one member
"I think it is better to find good stocks, then look for dips or a base."
That’s what the database is for. It allows you to find top stocks very quickly and determine what stage they are at (ie. near B/O, already B/O, finding support, breaking down, etc.) I know you aren’t a believer in technical analysis, but it’s the charts that reveal the future of the company. Somebody always knows something and that shows up in price and volume levels. In addition the common shapes of the charts reveal human emotions of fear and greed which never change. Enron was thought to be a good company and good stock at one time, but the technical action revealed what was about to unfold. A more recent example which I have discussed on this site several times in the past is DHB Industries. Here was a company that was receiving order after order, yet insiders and some institutions were selling big time. There was a clear divergence beteween the current fundamentals and news and what the chart was saying. Fundamentals and news don’t tell the whole truth, charts almost always do. On the other side of the equation, notice that some stocks will soar even though the fundamentals are awful. What happens several months down the road? You got it, the company starts announcing new products, improving sales and earnings. The charts forecast the future – it’s as simple as that.
"Your return of 30% on your portfolio last year is impressive, but Jubak had a 29+% return on his"
I like Jubak and think he has some good suggestions, but it’s a weekly column and doesn’t give specific buy and sell points if I’m not mistaken. It’s more of a hypothetical rather than an actively managed portfolio. The focus on my service is teaching the investor while profiting. That’s why I send detailed alerts, trading notes, technical analysis, etc. I want investors to know why I’m selecting a particular stock and why I’m selling.
"One concept I can’t get my arms around is drawing a line from some artifact on a chart 6 months back and trying extrapolate into the future"
Again, going back to what I said above, the reason this "technical analysis" works is because history repeats itself over an over again. Why? Because investor emotions of fear and greed will never change. Support and resistance areas also manifest themselves because they are watched by so many investors – a self fulfilling prophecy if you will. Technical analysis is absolutely critical. Think of it this way. You look at the fundamentals to choose a stock and use technical analysis to determine when to buy and sell that stock. Short term traders use more technical analysis, while longer term buy and hold investors will base decisions more on the fundamentals. I recommend something in between.