Forum Archive Index - October 2003

[Phaedrus <Phaedrus@techemail.com>]

Snoopy,
        You state "The more I study the RBD share price chart, the more I am 
convinced that it has almost no value." You must surely be joking!!! The RBD 
chart has so far proved its worth in a very satisfactory manner. The chart gave 
an absolutely unequivocal SELL signal on 7/5/02, giving an exit at $2.10 
(Price/volume climax, trendline break, moving average crossover etc) The 
simplest of TA techniques got you out of this stock just after its peak and 
kept you out for a year and a half while it fell by over 40%. RBD gave a 
trendline break buy signal yesterday at $1.33, though it is still in a 
long-term downtrend and the moving average has not been crossed yet. 

 Contrast this with your actions/recommendations based on fundamentals. On 
29/5/02, when RBD was $2.06 and a confirmed downtrend was in place, you said 
"The fact that the yield of these shares is so good means there exists a floor 
through which the share price is unlikely to fall". You spoke of RBD "having a 
growth strategy in place" and continued "I won't be quitting any of my income 
portfolio shares. I don't have to sell them, and I am quite happy to keep the 
income rolling in". While this modest income "rolled in", the capital value of 
your investment fell by over 40%. 

 By 25/7/02, when RBD had fallen by about 20% and the downtrend rolled on, you 
said "RBD is a 'Buffespeculative' buy at these levels" and "RBD, at $1.75, is 
one of those rare shares that is of interest to both the 'income' and 'growth' 
investor". RBD has fallen a further 25% since then. So much for standalone 
fundamental analysis and high yields providing a floor. What price income?
 
 Snoopy, you must learn to recognise a downtrend. You claim "Over the last year 
RBD has been in a trading range of $1.25 to $1.60" Quite wrong. Over the last 
year RBD has been making lower highs and lower lows - this is a downtrend. 

 "It is in the nature of charting that entry into a share is always late.... 
all a late entry does is reduce your potential profits" Wrong. If you wait for 
an established downtrend to reverse before buying, "late" entries also reduce 
your risk of loss and often give a more favourable entry price. I'll bet you 
wish that your entries into RBD earlier this year had been "late"!

 "The other 'problem' with charting is that the share price movements do not 
seem to relate to any developments within the company. In other words share 
price movements seem to be essentially random and unrelated to underlying 
performance." Snoopy, this is not the problem with charting - this is the 
problem with fundamental analysis!!!! In any case, over the period of the 
chart, RBD's shareprice movement has most certainly NOT been random. There was 
a very clear uptrend immediately followed by an equally obvious downtrend. 

"It is very difficult to be an F/A person then use T/A to select an entry point 
in such circumstances" Not at all. Your primary investment parameters are still 
valid. Just don't buy into an established downtrend, that's all. It is that 
easy to combine the two techniques. 

 Snoopy, we have had this same discussion time after time after time. We could 
just as easily be talking about WHS or TLS. Same story. Same arguments. Same 
entrenched positions. Same consequences. I despair.

            Regards,
                      Phaedrus.


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