Is there a sure way of looking at Charts to perdict the movement of a Stock?

Question

How do the professionals do this? Channeling,pivot points,cup handles and Lord knows what else?

Answer 1

There is a reason that technical analysis is not taught in college finance classes -- it doesn't work.

For most stocks, there is no predictability.  There have been a number of academic papers in the last fifteen years that do look at "momentum" stocks.  Most of the momentum action takes place in small cap stocks that are doing poorly.

Fundamental analysis points to why this is happening, rather than technical analysis.

Answer 2

Charting always works in hindsight, but never works when it comes to predicting the future. Other tools such as moving averages (especially MACD) are just as useless at predicting the future.

One key problem with moving averages is that today's value of a N-day moving average is actually the value N/2 days ago. For example, the value computed as today's 200-day moving average is actually the average for 100 days ago. Take a look at any moving average graph and you will see that it is shifted to the right. The result is that people looking at a moving average think they are acting on the latest information, but they are actually acting on out-of-date information.

The MACD is even more screwed up. For example, a 12/26/9 MACD compares a 12-day moving average with a 26-day moving average, doing a 9-day moving average on the difference. The problem is that the 12-day average is shifted 6 days and the 26-day average is shifted 13 days, and moving average on the difference is shifted another 4.5 days. That results in all sorts of spurious noise which people misinterpet as valid information. If you were to do a 12/26/9 MACD properly, it might give you valid signals, but they would be delayed 17.5 days. That's not very useful.

Answer 3

the truth is - the Lord does know - and He's not telling

technical charting works 80% of the time

it's always easy to look backwards (e.g. Armchair Quarterback)

and define a moment - than to use current data to say where the next hour will end up

My investments have always been made in the 20% range of

WOW that's new territory - we've never seen that before !

So I am not quitting my day job

all the best

Answer 4

There really is not sure way to anything in life, this means stock investing/ trading too.

The Channeling concept was allegedly devised by "Financial Guru" Wade Cooke (in prison now), and this has been repopularize by TV commercials. Channeling is an oversimplification.

Stocks really don't trade in low or high "Channels" forever. if this was true the market would be essential flat forever. The fundamentals will give cause to push above or below any trend.

One of the key charts that traders look at is the 200 day moving average. The 10 day, and 50 day are also watched.

If the trend line breaks, often sell programs kick in. The opposite also tends to be true, a break out above the last resistance can trigger buys.

I like the MACD study among many others. The problems that they can generate so many buy and sell signals that you will run out of margin in about 30 minuets.

Keep long term price movements in watch, and always pay attention to fundamentals. If the company is consistently making money and growing it's business this is the best piece of information one could ever want for their investment.

Good Luck!