Interesting. Based on your experience/history, do you have an example?
TA vs FA
- Thread starter KGTrader4
- Start date
Interesting. Based on your experience/history, do you have an example?
The examples are plenty. I will give you one that made the strongest impression on me to illustrate what I mean. I don't know if you remember about the Swiss Bank removing its peg to the Euro on Jan. 15, 2015. Up until then, CHF had been in a steady decline for several years since 2011 and you can see this with all of the CHF pairs but I will use USD/CHF to illustrate. From the technical analysis point of view, USD/CHF was in a steady bull trend from the beginning of 2014, the pair was making new highs steadily along breaking through the upward price channels several times and making the price channels appear at a steeper and steeper angle with the lower channel lines providing nice support for the PA. The uptrend is also confirmed with the three simple moving average lines at periods of 9, 20, 50 with the shorter period moving average lines always above the longer period moving average lines with the MA with the longest period of 50 at the bottom indicating that the most recent prices are higher than prices from previous periods. That nice bull trend came all crashing down on Jan. 15, 2015 when the Swiss central bank the Swiss National Bank (SNB) suddenly announced that it's removing the peg to the Euro (a fundamental factor) and that sent the CHF through the roof and the USD/CHF pair free-falling dropping close to 20% illustrated by this one big long beautiful transparent white bar circled for your convenience. This was one of the biggest Black Swan event in FX history. This event was so big it took out TWO currency trading brokerages with one of the largest in the industry Alpari UK gone because they couldn't answer their margin calls to their liquidity providers. This price drop is just way too big to be explained by technical analysis. When a price is in an uptrend, even if it retraces, it usually retraces to either significant support lines (which many times are former resistance lines) or to Fibonacci ratios. I am a fan of Fibonacci ratios and as you can see from the chart below, the 38.2% and 78.6% levels both could be potentially strong support levels. It's highly unlikely when the price is an uptrend would all of sudden in one day drops all the way below the 100% level. This has to be explained by external fundamental factors which are not able to be taken into account yet by technical analysis when it happens. And when the fundamental factor (the SNB removing the peg of CHF to the Euro) came into play, the price moved according to the fundamental factor.
And continued to move according to the fundamental factor until it wore off and very interestingly the "SNB effect" wore off very quickly in one day. Starting the second day, the technical factors took over and USD/CHF started climbing from the lowest point and by November of the same year, it pretty much reached the same level as before the SNB's decision as you can see below.
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Some of my best trading ideas have come from technical analysis alone. The fact is news is stale by the time you get it. All the big boys (hedge funds, banks, brokers, mutual funds) have taken positions by the time news filters to the average retail trader. As for earnings, earnings are reported 3 months, after the fact. You would not know a stock that is beaten down, that is now recovering nicely, and earnings about to turn into huge blowout earnings surprise until they report, 3 months after. So, while, fundamental analysis has its value in choosing good companies, it should only confirm what you already see from the price action and how the stock is moving relative to the entire market. Technical analysis will show you that.
Beautifully put. Thanks for the example.
Yes I have heard about that event. What a drop.
I'll give you two chart examples, examine the charts of WYNN and NVDA. If you bought it when it broke out after the downtrend, you would have been rewarded with huge gains. No news will tell you to buy at the bottom. Even CNBC and its numerous analysts and even CEOs will tell you to buy their companies at the very top. So, what news or even fundamentals will tell you to get in when most people are scared to get in such stocks? The big boys (hedge funds, banks, brokers, mutual funds) all did because buying drives share prices higher. Chances are good the hedge funds and other big boys bought heavily on the breakout. Just common sense. Funny too, I have been lectured by some ET trolls that technical analysis does not work at all. Good. More for us.
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Interesting, I never thought to look at who the directors are.
Do you also look at growth rates? To me, that’s seems like it should be a key driver if price action intermediate to long term
What’s your general holding period? Swing? Position?
This is where I’m moving towards
what is a 13f-HR? I know 13F is holdings, what’s the HR? And what’s the value?
I think this depends on your time frame
I agree with this and have always thought so. In fact I used that argument about all that’s known is priced in, as a Financial advisor before I retired, to sho clients why they are better off in index funds than trying to pick stocks because “I think their product is great, blah, blah blah”.
but don’t you think that after wild move up over a couple of days, there’s a better chance that the wild move is the beginning of a long stage 2 accumulation phase if the company is crowing earnings, and or revenue at a fast clip?