Forum Archive Index - October 2003

["tennyson@caverock.net.nz" <tennyson@caverock.net.nz>]

Hi Woody

>
>Perhaps I don't understend the Clock analogy very well...
>

OK I'll make my point again in a different way.  The pure trader claims 
they don't need to study F/A because all the characteristics of any 
company have been well studied by analysts, all the good and bad 
outlooks have been well documented, and what appears on your 
computer screen is a summary of everything: the market price.

By this logic, the pure T/A person will only focus on price and the 
direction of movement of that price.  Everything else disappears from 
the T/As vision: except the price, and the price history!

A potential problem  I see in this method is that a 'price' is only a label.  

Would you be happy to go into a supermarket and buy your groceries 
by selecting a tag from a  large noticeboard consisting of 'price labels 
only' mounted on hooks?    Once you have selected your 'price goods 
labels'  you would then hand them to the check out and some happy 
store person would go out the back and collect the goods for you and 
deliver them in a brown paper bags to your house.     If you are 
thinking that what I have described sounds something like internet 
shopping as practised by Woolworths (for example) you are correct, 
except there are two small differences.

1/ There are no pictures or descriptions of the goods when you order 
them in my 'buy by noticeboard' scenario.
2/ There is a 'no return' policy in my scenario.   Once you order a good 
and it is delivered in its paper bag you must keep it. 

So, I ask you, would you be happy to do your grocery shopping under 
my system?    If you knew exactly what you were getting, possibly yes.   
But do you always know exactly what you will be getting?

For example, say you want to order a supply of cakes of soap, enough 
for a year of use.    Now suppose the manufacturer made the cakes of 
soap 25% smaller without announcing that fact, but kept the price the 
same.     You order 12 cakes of soap at the price you know, but find 
that instead of lasting until the end of the year, you run out of soap at 
the end of September.  You run out of soap because you failed to 
closely inspect the goods when it came to you and failed to notice that 
although the price you paid was what you expected to pay, and the 
number of soap cakes you expected to get arrived, you did not notice 
that the size of the cakes of soap had become smaller.

By an analagous argument, you might buy a share at $1.25 because 
that price has proven to be a 'lower bound resistance point' in the past.  
But by using this strategy you assume that you know what you are 
buying.    If the underlying fundamentals of the share have changed 
you may *not* know what you have bought and your assumed support 
and resistance lines might have changed.    You will then suffer the 
equivalent share indignity of running out of soap.

>
>but here is a little challange for you. Send  me a
>Chart any chart preferably a weekly over several years and I will
>prove that it has Support and Resistance areas weeks, months and 
even
>years Old.
> 
>I dare you!!!!
> 

OK, I might just do that.  I will send it to you off-line.

SNOOPY


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