Technical analysts dominates the daily discussion of stocks. Fundamental concepts change slowly. Chart patterns change constantly. Usually the calls are dramatic, because no one cares about advice that says, “all is well, keep holding.”
Traders live on stock charts, but investors also pay close attention. Everyone wants to know whether a stock is breaking down, breaking out, or stuck in a trading range. Here is the key question:
How do you spot a good chart?
We have several great charts this week. The Stock Exchange provides an expert-level debate on technical and fundamental analysis. (Important background is available here). Comments, dissent, and specific stock questions are welcome!
This Week—Is Felix right about KHC?
One issue with charts is the wide difference in interpretation. Do analysts see what they want to see? Are the interpretive criteria constant and objective? This week (without telling him) I searched for other opinions on one of our expert selections, Felix’s choice of KHC. The same principles would apply to all the picks, but this is a convenient example. Before turning to Felix, let’s look at other approaches.
This one provides a complex chart and plenty of additional points of interest. It makes a lot of specific predictions, suggesting many trades with moves of less than one point.
Here is another, one-year term and 50-day MA. This is a much longer time frame with an implied criterion reflecting that.
And a dramatically different time frame from the same source. Instead of a 50-day MA, we now have two hours.
And one more site, which invites predictions. I am not sure what conclusion you would reach, but the participants have many different conclusions.
The key point of this comparison is the widely differing images and viewpoints. The time frame matters, and so does added complexity.
Let’s see what Felix has to say, and also check out my own conclusion to this article.
