[CANSLIM] Chart Reading - November 2002

From: "Gene Ricci" <genr@swbell.net>
Subject: [CANSLIM] Chart Reading - November 2002
Date: Mon, 18 Aug 2003 11:48:35 -0500
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Jeff, until I was sent the following excerpt from an article by Gary B. =
Smith ... I felt out of place amongst the CANSLIM crowd because I'm =
pattern challenged. Here is the excerpt followed by an article from =
Investors Corners.... the blue highlighting is mine.

Gene

November 2002

TSC Technical Forum
What to Watch for When Reading Charts
By Gary B. Smith
Special to RealMoney.com

Head and shoulders. Cup and handle. Bullish flag. Bearish pennant. Yes, =
all of those patterns are important things to look for in chart-reading. =
They are also pretty meaningless.=20

Just remember one thing when you look at charts: All you really need to =
watch out for are support, resistance and trend lines. Add on volume and =
price action, and pretty soon you have 99% of what you need to be an =
"expert" chart reader.=20

******************

Investor's Corner Monday, November 18, 2002

Chart Reading Is Based On Studies, Not Fantasy

BY CRAIG SHAW
INVESTOR'S BUSINESS DAILY

Random lines and bars. Reading tea leaves. Hocus-pocus. So the critics =
would have you believe about technical analysis, the use of stock =
charts. Unfortunately, they're badly misinformed. Some investors make =
decisions strictly on fundamentals, others technical analysis only. =
IBD's method uses both.

Fundamental analysis breaks down a company's balance sheet and income =
statement. It's a way to divide the wheat from the chaff.

Technical analysis studies a stock's price and volume action. It traces =
supply and demand, showing how a stock is acting in the marketplace.

Put another way, fundamentals tell you which stocks to buy. But =
technical analysis tells you when to buy them and, equally important, =
when to sell.

Think of all the Wall Street analysts who told clients to buy or hold =
techs after the Nasdaq's top, stressing their fundamentals were still =
solid. "Nobody employing technical tools held Lucent from 72 down to 50 =
cents," said Ken Tower, chief market strategist for CyberTrader and a =
veteran technical analyst. Many folks have opinions about stocks. But =
charts give you facts. They tell you whether a stock is moving higher in =
a healthy manner, or going into free fall.

The Art of Charts
Technical Analysis:
a. helps investors control their emotions
b. provides facts about stock behavior, not opinions
c. reflects market psychology, which doesn't change
d. reveals the tracks of institutional buying and selling
e. saves investors from costly losses by sending sell signals


A company might have a great profit record while its stock is still =
groping for the bottom. Even more dangerous, it might be peaking after a =
big rally. Most stocks' fundamentals look outstanding at the top, before =
prices collapse.

A recent Motley Fool column rapped technical analysis, suggesting that =
aficionados of the cup-with-handle base might next search for the =
"ostrich-and-eggbeater pattern."

"Like many patterns, this would be a randomly occurring one, a =
coincidence," the Fool said. "For you to bet any of your hard-earned =
savings on this would be nothing more than gambling."

Not quite. Chart patterns reflect investor psychology, which hasn't =
changed over time. That's why the same formations repeat themselves =
decade after decade.

By buying stocks breaking out of sound bases, you're following in the =
footsteps of deep-pocketed institutions. Since these folks control up to =
three-fourths of the market's volume, it's hardly foolish to follow =
their tracks.

But keep it simple. Advanced technicians study what can be a dizzying =
array of indicators. Don't get bogged down. Focus on price and volume =
action. Make sure a stock's in a solid uptrend, hitting new highs on =
strong trade. Look for support at moving averages.


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<DIV><FONT face=3D"Comic Sans MS">Jeff, until I was sent the following =
excerpt=20
from an article by Gary B. Smith ... I felt out of place amongst the =
CANSLIM=20
crowd because I'm pattern challenged. Here is the excerpt followed by an =
article=20
from Investors Corners.... the blue highlighting is mine.</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS"></FONT>&nbsp;</DIV>
<DIV><FONT face=3D"Comic Sans MS">Gene</FONT></DIV>
<DIV><FONT face=3D"Comic Sans MS"></FONT>&nbsp;</DIV>
<DIV><FONT face=3D"Comic Sans MS">November 2002<BR><BR>TSC Technical =
Forum<BR>What=20
to Watch for When Reading Charts<BR>By Gary B. Smith<BR>Special to=20
RealMoney.com<BR><BR>Head and shoulders. Cup and handle. Bullish flag. =
Bearish=20
pennant. Yes, all of those patterns are important things to look for in=20
chart-reading. They are&nbsp;also pretty meaningless. =
<BR><BR><STRONG><FONT=20
color=3D#0000ff>Just remember one thing when you look at charts: All you =
really=20
need to watch out for are support, resistance and trend lines. Add on =
volume and=20
price action, and pretty soon you have 99% of what you need to be an =
"expert"=20
chart reader.</FONT></STRONG> =
<BR><BR>******************</FONT><BR></DIV>
<DIV align=3Djustify><TT>Investor's Corner Monday, November 18, =
2002<BR><BR>Chart=20
Reading Is Based On Studies, Not Fantasy<BR><BR>BY CRAIG =
SHAW<BR>INVESTOR'S=20
BUSINESS DAILY<BR><BR>Random lines and bars. Reading tea leaves. =
Hocus-pocus. So=20
the critics would have you believe about technical analysis, the use of =
stock=20
charts. Unfortunately, they're badly misinformed. Some investors make =
decisions=20
strictly on fundamentals, others technical analysis only. IBD's method =
uses=20
both.<BR><BR>Fundamental analysis breaks down a company's balance sheet =
and=20
income statement. It's a way to divide the wheat from the=20
chaff.<BR><BR>Technical analysis studies a stock's price and volume =
action.=20
It&nbsp;traces supply and demand, showing how a stock is acting in the=20
marketplace.<BR><BR>Put another way, fundamentals tell you which stocks =
to buy.=20
But technical analysis tells you when to buy them and, equally =
important, when=20
to sell.<BR><BR>Think of all the Wall Street analysts who told clients =
to buy or=20
hold techs after the Nasdaq's top, stressing their fundamentals were =
still=20
solid. "Nobody employing technical tools held Lucent from 72 down to 50 =
cents,"=20
said Ken Tower, chief market strategist for CyberTrader and a veteran =
technical=20
analyst. Many folks have opinions about stocks. But charts give you =
facts. They=20
tell you whether a stock is moving higher in a healthy manner, or going =
into=20
free fall.<BR><BR>The Art of Charts<BR>Technical Analysis:<BR>a. helps =
investors=20
control their emotions<BR>b. provides facts about stock behavior, not=20
opinions<BR>c. reflects market psychology, which doesn't change<BR>d. =
reveals=20
the tracks of institutional buying and selling<BR>e. saves investors =
from costly=20
losses by sending sell signals<BR><BR><BR>A company might have a great =
profit=20
record while its stock is still groping for the bottom. Even more =
dangerous, it=20
might be peaking after a big rally. Most stocks' fundamentals look =
outstanding=20
at the top, before prices collapse.<BR><BR>A recent Motley Fool column =
rapped=20
technical analysis, suggesting that aficionados of the cup-with-handle =
base=20
might next search for the "ostrich-and-eggbeater pattern."<BR><BR>"Like =
many=20
patterns, this would be a randomly occurring one, a coincidence," the =
Fool said.=20
"For you to bet any of your hard-earned savings on this would be nothing =
more=20
than gambling."<BR><BR>Not quite. Chart patterns reflect investor =
psychology,=20
which hasn't changed over time. That's why the same formations repeat =
themselves=20
decade after decade.<BR><BR>By buying stocks breaking out of sound =
bases, you're=20
following in the footsteps of deep-pocketed institutions. Since these =
folks=20
control up to three-fourths of the market's volume, it's hardly foolish =
to=20
follow their tracks.<BR><BR>But keep it simple. Advanced technicians =
study what=20
can be a dizzying array of indicators. Don't get bogged down. Focus on =
price and=20
volume action. Make sure a stock's in a solid uptrend, hitting new highs =
on=20
strong trade. Look for support at moving=20
averages.<BR><BR></TT></DIV></BODY></HTML>

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