Watching the Detectives

Using stock charts or technical analysis to invest or position trade stocks works.  A lot of investors/traders make their stock picks by analyzing a company’s fundamentals which involves the price-earnings ratio, growth, business lines etc…  This fundamental approach is valid and works well except when the market is headed lower as ‘When the tide goes out, all ships go down.’  You may have noticed this in 2008 when your broker was probably calling you and telling you to buy saying ‘stocks have not been this cheap since 2004, you have to buy!’

The problem with that phone call was that the next week you got another call with someone saying ‘stocks have not been this cheap since 2002, you have to buy!’  And then it was 2000, then 1998 and then stocks got so cheap, using this argument, that I cannot say how far back you need to go as my charting service only goes back to 1997.  Stock charts told you the market was in a down trend and that you should NOT be buying.  Had you got out when stocks were at their 2004 levels in 2008, when you got that first call from your broker, you would have lost less money and been about even to today.  Had you known how to read a chart and got out at that first call (2004) and bought into the market when the down trend was broken (April 2009) you would be UP a LOT of money right now.

Technical analysis of stock charts works and this type of analysis takes into account the price-earnings multiples and the growth rates and every factor as by watching the price movement you are, in effect, ‘Watching the Detectives.’

For more information on my Multi-Media Technical Analysis Educational Package go to www.StockTradingCards.com.

Good analysts at the broker dealers make good stock calls.  What these fundamental analysts do not take into account is the ‘mood’ the market is in.  Charts do.  When the tide goes out, all ships go down, even good stocks with superior fundamentals.

These ‘Detectives’ are the analysts that are calling management, studying the stocks and doing all the leg work you and I do not have the time to do.  What we can do is watch what they are doing.  Was Goldman Sachs buying mortgage bonds as that market collapsed?  NO!  Goldman was shorting mortgage bonds and Goldman made a LOT of money doing it.  If the market is selling a stock off and it is a very good stock fundamentally in a great business with the best CEO on the planet running the company, guess what?  The stock goes down and YOU lose money.  If it is going down – it is going down, and so is the bottom line in your portfolio.

Netflix reported they were open for business in Canada today and the stock popped.  This stock is on fire and probably goes even higher from here.  Do I know what their earnings are or what their P/E is?  No.  I have passed my NASD fundamental analyst licensing tests and can do this type of analysis and I have posted some of this type of work on my site.  More than doing the fundamental work, I just plain like the chart.  The stock is in an uptrend and until the uptrend line is broken to the downside I like Netflix to go higher.  The ‘Detectives’ agree with me.  The analysts (detectives) may have known this announcement was coming by doing all the research they are paid to do.  Most every recommendation on Netflix out there is a ‘Buy.’  Do I need to know that?  NO. 

Stock charts ‘Watch the Detectives.’  Just knowing how to identify if a stock is in an uptrend or a down trend can save you a lot of money and even make you a lot of money.  The third DVD of my 4 DVD multi-media educational package teaches you all you need to know about trend lines. 

‘Do what I say, not what I do’ does not work in the stock market.  I am watching what they are doing very carefully.  I am ‘Watching the Detectives’ by watching the buying and selling represented on the stock charts.

Isn’t it time you started keeping a closer eye on what they are doing on Wall Street?

For more information on my Multi-Media Technical Analysis Educational Package go to www.StockTradingCards.com.

Wednesday, September 22, 2010 - 1:45 p.m.