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#92
11-16-2007, 07:34 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
how do you explain when something "blows through" a resistance level? Barron [/ QUOTE ] Enough new demand has been generated for the stock so that the Specialists and MMs can absorb the overhead supply at 100 without their inventories taking a serious hit. 
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#93
11-16-2007, 09:05 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
[ QUOTE ] how do you explain when something "blows through" a resistance level? Barron [/ QUOTE ] Enough new demand has been generated for the stock so that the Specialists and MMs can absorb the overhead supply at 100 without their inventories taking a serious hit. [/ QUOTE ] how do you know beforehand that will happen? Barron
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#94
11-16-2007, 09:28 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
how do you explain when something "blows through" a resistance level? Barron [/ QUOTE ] Just put yourself in the position of the sellers and buyers, and you will figure it out. What happens is that lets say MSFT reach $100 again and the added selling pressure puts the price back to $80. Then eventually the price reach $100 again and the sellers are still glad they sold for $100 since it seems that MSFT are "not worth" more then $100. The buyers at $100 are glad to be break even and some sell and some dont. But then all of a sudden, MSFT starts to reach $102, $104, $108 and then the sellers at $100 instantly realizes "Holy crap, I should never have sold that darn fine stock MSFT" since they now would have had a win. They seriously consider buying the stock back, despite the higher price, and many do. That leads to added buying pressue. Also the old buyers at $100 (both times) are finally seeing some profit after a long time of red figures, and they are reluctant to sell now ("I knew I was right to hold on to this baby!"). That adds to the lack of selling pressure. So this is a situation where pretty heavy price movements can occur in short time, often referred to "blow outs" as you said yourself. Same thing when a stock price reach ATH (all time high). Then there is not a single stock owner who has a loss. Every single share owner is seeing a profit, and since there is noone to sell to get break even, you very often see a price rush when an old ATH is passed. Look for yourself.
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#95
11-16-2007, 09:41 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
[ QUOTE ] how do you explain when something "blows through" a resistance level? Barron [/ QUOTE ] Just put yourself in the position of the sellers and buyers, and you will figure it out. What happens is that lets say MSFT reach $100 again and the added selling pressure puts the price back to $80. Then eventually the price reach $100 again and the sellers are still glad they sold for $100 since it seems that MSFT are "not worth" more then $100. The buyers at $100 are glad to be break even and some sell and some dont. But then all of a sudden, MSFT starts to reach $102, $104, $108 and then the sellers at $100 instantly realizes "Holy crap, I should never have sold that darn fine stock MSFT" since they now would have had a win. They seriously consider buying the stock back, despite the higher price, and many do. That leads to added buying pressue. Also the old buyers at $100 (both times) are finally seeing some profit after a long time of red figures, and they are reluctant to sell now ("I knew I was right to hold on to this baby!"). That adds to the lack of selling pressure. So this is a situation where pretty heavy price movements can occur in short time, often referred to "blow outs" as you said yourself. Same thing when a stock price reach ATH (all time high). Then there is not a single stock owner who has a loss. Every single share owner is seeing a profit, and since there is noone to sell to get break even, you very often see a price rush when an old ATH is passed. Look for yourself. [/ QUOTE ] how do you know when this will happen beforehand? Barron
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#96
11-16-2007, 09:54 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
MSFT starts to reach $102, $104, $108 and then the sellers at $100 instantly realizes "Holy crap, I should never have sold that darn fine stock MSFT" since they now would have had a win. They seriously consider buying the stock back, despite the higher price, and many do. That leads to added buying pressue. [/ QUOTE ] Someone just sold MSFT at a profit/or is just breaking even at a given price..... IMO the only new "GUARANTEED" new buyers are players who SHORTED the stock at $100...and are now scrambling to cover causing the stock to climb higher .....even if its just a technical rally and NOT based on new positive fundamentals Anyone that did SELL...and is now justifying re-entering at a much higher price level,should seriously reconsider "the trading" vs. the "buy and hold stratagy" Stephen [img]/images/graemlins/cool.gif[/img]
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#97
11-16-2007, 10:00 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] how do you explain when something "blows through" a resistance level? Barron [/ QUOTE ] Just put yourself in the position of the sellers and buyers, and you will figure it out. What happens is that lets say MSFT reach $100 again and the added selling pressure puts the price back to $80. Then eventually the price reach $100 again and the sellers are still glad they sold for $100 since it seems that MSFT are "not worth" more then $100. The buyers at $100 are glad to be break even and some sell and some dont. But then all of a sudden, MSFT starts to reach $102, $104, $108 and then the sellers at $100 instantly realizes "Holy crap, I should never have sold that darn fine stock MSFT" since they now would have had a win. They seriously consider buying the stock back, despite the higher price, and many do. That leads to added buying pressue. Also the old buyers at $100 (both times) are finally seeing some profit after a long time of red figures, and they are reluctant to sell now ("I knew I was right to hold on to this baby!"). That adds to the lack of selling pressure. So this is a situation where pretty heavy price movements can occur in short time, often referred to "blow outs" as you said yourself. Same thing when a stock price reach ATH (all time high). Then there is not a single stock owner who has a loss. Every single share owner is seeing a profit, and since there is noone to sell to get break even, you very often see a price rush when an old ATH is passed. Look for yourself. [/ QUOTE ] how do you know when this will happen beforehand? Barron [/ QUOTE ] I donīt quite understand what you mean. I just tried to explain why often a stock trades in a range $80-$100 and then "explodes" to $115. Given the above scenario, I know it is an increased chance of MSF making a price jump once it trades at $101, because of the mental states of the buyers and seller. So one technique to capitalize in this market imperfection would be selling MSFT short at $97 with a stop-and-reverse order placed at $101. Target levels would be $85 for the short order, and maybe $112 for the long position if that is executed. Did I misunderstand your question?
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#98
11-17-2007, 12:07 AM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
how do you know when this will happen beforehand? [/ QUOTE ] You don't, but you may have to make several attempts to catch a possible move. The trick is to ensure your many losses when wrong are small enough to not offset the few times you are right. Building positions that have been tested to robustly provide high risk/reward trades doesn't involve any prediction or prior knowledge to a future price movement.
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#99
11-17-2007, 03:42 AM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
how do you know beforehand that will happen? Barron [/ QUOTE ] As Kimchi said, you don't, but, volume can be a clue. If the stock rises on light volume, there's a chance that the specialist has conserved enough of his inventory to break through that resistance point.
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#100
11-17-2007, 11:34 PM
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Re: Why are value investor types so rigidly opposed to TA?
[ QUOTE ]
[ QUOTE ] [ QUOTE ] [ QUOTE ] [ QUOTE ] Why are those types so ready to dismiss TA as worthless? [/ QUOTE ] because they are poor value investors and have a strong need to validate themselves. [/ QUOTE ] Neither of this applies to Buffett or dozens of value managers with multi-decade records of beating the market. These guys don't use TA, and don't need any more validation. Whether TA works or not, they'll tell you they never needed it. [/ QUOTE ] i don't consider buffett et al "those types" - and (correct me if i'm wrong) i don't think buffett would claim that TA is worthless to everyone. [/ QUOTE ] How come there are value investors in the Forbes 400 but no TA types? [/ QUOTE ] John Arnold for one. Youngest on the Forbes list, was a trader for Enron and now has his own hedge fund.
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