Is technical analysis less accurate on...

M

mgregor

I'be been looking over hundreds of daily charts lately, and I've noticed something interesting. It seems that on a lot of the less widely followed stocks, technical analysis and chart formations seem to appear in a much more clear and organized fashion then on some of the more popular stocks.

My guess is that on the more widely followed, favorite stocks of many traders, like CIEN, JNPR, CSCO, MSFT, etc., the volatility just makes the charts messier. That's not to say that technical analysis is not valid on those stocks, just a lot harder to spot any solid trends, or formations.

So, my conclusion would be that it would be easier for one to follow less popular stocks for finding more clearly defined patterns.

What do you guys think?

 
Mgr--I believe this is a clear and accurate observation and it baffles me that in todays deceptive mkt where on many days there is very little real trading going--just stocks being pushed around by mm/specialist and short term traders-- many traders still insist on focusing on these stocks with flawed ta.
 
Agreed. Nowadays there are too many daytraders on the NAZ. Take a look at http://www.tradescape.com homepage where they list their in-house volume top-10, they are constantly in the 10-20% range of the total volume of the day, and that's just ONE daytrading firm ! When you have so many daytrading going on, textbook TA will not work. Besides, those popular stocks are usually traded by the best market makers on the street, who are trained to kill daytraders.
 
That is true. On more liquid stox, major support/resistance points act just like magnets as the novices try and anticipate breakouts. It is best to fade those moves, cause inevitably they will break out, only to fail. This is the main reason that I mainly try to trade stox that are under 500k shares, preferably 300k and under. That way there are less traders available and less futures action and more just supply and demand.
 
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