As we wrestle with this market, which is now comprised of a whole lot of very ugly charts, it's a good time to reflect on the benefit of using charts. Many Wall Street professionals are quick to dismiss the use of charts. They like to believe that fundamental analysis is the only way to invest and, of course, that is a service that they will be happy to provide to you.
Regardless of what anyone might think of technical analysis and charts, there is one thing that is indisputable. No stock can be a major winner over a long period of time unless it has a good chart much of that time. The only way a stock can double and triple over time is to keep on hitting new highs, and that is what tends to make for good charts.
That is just common sense, but it is an easy thing to overlook, especially when you keep hearing about "values" and bottom-fishing in a poor market. You might get some good trades by buying beaten-down stocks in a poor market, but the big winners are always going to be the stocks that have "good" charts for a long period of time.
Right now there are very few favorable charts in this market especially as the last momentum sectors take some big hits. Maybe some of the beaten-down stocks will turn into big winners in the future, but first they will have to develop into better charts, and in this market, that is going to take some time.
Rev Shark Blog What's Your Time Frame? 7/7/2008 8:04 AM EDT It'll define how you play this sickly market.
Rev Shark Blog Market Still Has a Lot of Work to Do 7/3/2008 1:06 PM EDT If you're holding cash, you'll be ready to act when conditions improve.
Rev Shark Blog A Suspect Bounce 7/7/2008 10:11 AM EDT Can the bulls keep it up today?
James "Rev Shark" DePorre is the author of Invest Like a Shark: How a Deaf Guy with No Job and Limited Capital made a Fortune Investing in the Stock Market. He is founder and CEO of Shark Asset Management, an investment management firm, and he also operates sharkinvesting.com, an interactive online community that serves and educates active investors. DePorre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here.
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