The chart's terrible!
For many people in this business, that's how conversations start about stocks right now. They hear a name that sounds interesting, they call up the chart -- is there anyone on this planet who cannot get the charts that were once only the province of those with
-like capabilities? -- and they see some stock that is in a downturn, or a funk, or a flag, or a right shoulder. Whatever. And they pass. They don't want in.
That's the way it is all over the Street right now. We have had so many more issues declining than advancing that almost every stock looks poised for further weakness.
I am not a chartist. Yet I read
Gary B. Smith
. Yet I pore over
. Yet I have a
machine that makes excellent charts with all sorts of MAC-D and RS and HF components (slang for moving average, relative strength and money flow). Yet I enjoy looking at the graphics of the charts in
Investors Business Daily
Why bother? Because so many others bother. I remember when I got to the old Philadelphia office of
, there were some people there who did hand charts every day. This was about 18 years ago, and I was blown away. Heck, the most fundamental firm on Wall Street and these guys were doing charts that rivaled those
did to game the ponies.
Same thing when I left Goldman. I had a brief stay at
, one of those classic swashbuckling hedge funds, where I met my wife, who was on the trading desk. Everybody looked at charts in that shop. Everybody. So it has just become a part of my routine. Here's what I know about charts: They are part of the firmament. They are something people look at before buying. Therefore I have to look at them. They are a factor in my decision-making process.
That said, I never make decisions based solely on them. That's because the sharpest moves occur at the chart's inflection points, and I want in on those moves. For example, yesterday's tech rally, which was a great one, could not have been predicted by charts. There was no way that if you were strictly a chartist, you would have ever bought
at 150 yesterday. (See my piece about
playing Yahoo! football with
So why did I buy it? Because I believed I could make money from that level. I think it's a stock that will work. I had waited 10 points between my buys -- remember my old rule that 10 Internet points equal 1 regular point, kind of like dog vs. human years -- and my discipline said it was time.
However, I wish I had the comfort of the chart behind me. But I didn't. So be it. A lot of times, chartists will have the comfort of the chart and a disdain for the fundamentals. I, on the other hand, love the fundamentals and have neither disdain nor religion for the charts. They are simply part of the mosaic.
James J. Cramer is manager of a hedge fund and co-founder of TheStreet.com. At time of publication, his fund was long Yahoo!, although positions can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Cramer's writings provide insights into the dynamics of money management and are not a solicitation for transactions. While he cannot provide investment advice or recommendations, he invites you to comment on his column at firstname.lastname@example.org.