Originally posted by 10
I have never understood charts or chartists.
The modern equivalent of water-divining and witch-smelling in my book.
There's fundamentals and SFA.
If it makes more than expected it'll go up. Conversely, Less = down.
I'm still a holder but circa $8.50 ain't doubling any time soon unless the A$ and US$ which measure it plummet themselves.
Theres only so much juice you can squeeze from one orange.
I was in your camp some years ago and then I completed a Finance Masters and undertook some research and ended up running a fund. What I learned was that technical are a real thing and are a graphical representation of human behavior which in some cases is persistently repeated. Even to the extent that belief in technical is self fulfilling.
In the long run value is value and there is no avoiding that measurement. In the short term the market is an emotional creature and some of those emotions can happen predictably.
There are some quite successful hedge funds that make a crust out of this and some research about that supports the repetition of certain patterns. Worth reading material on the debate about efficient market theory case against.
I find the RSI very instructive, MACD and certain candle patters in trading activity signaling a turn in trend. I actually learned a few tricks from clever people on Hot copper and then researched it to solidify my understanding. What is really interesting is the narrative around phycology attached to some of the technical signals.
Let me offer an example of an inefficiency. There are numerous studies available with large samples, that show that companies that report surprise earnings upside outperform the market for about 90 days following the announcement. If the market were efficient the new information would be immediately reflected in the price.
I think technical works best when trading around quality which is underwritten by fundamental analysis. E.g. It is better to trade around a stock and business model that you believe in than one headed for insolvency.
The other thing is that patterns and technical work until they do not. Good traders stop themselves out of mistakes. If it were entirely accurate and predictable, everyone would do it and the arbitrage available to skill and judgment would disappear. Markets would be perfectly efficient (and they are not).
Just my humble learning and I am not rich. If I were great at this I would be and I would not be phaffing about posting on Hotcopper.
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