Charts Making the Difference

I saw an interesting segment on television the other day about technical analysis. Technical analysis primarily used charts to make buy and sell suggestions and predict future price targets. This particular segment showed chartists using past stock price data to determine when investors get in and get out for certain stocks. Lately, I haven't exactly used this idea to pick stocks, but I have used an another version. I have been focusing on sectors that will be the first to recover from recessions such as consumer discretionaries, industrials, financials, etc. We have seen jumps in a few of these sectors to confirm these allegations. I flip through Valueline and look at charts of companies from each of these sectors. I usually like to see a chart that has been on a steady incline for the past 10 years. However, due to the huge drop in the market, I have been focusing on companies that been hit hard and have begun to rebound nicely.

What I really want to point out is that you do not always have to worry about fundamentals when trying to pick stocks. In a rally like this, the investors out front are the ones who are focusing on short term movements. As a result, my portfolio is up nearly 50% on the year. I'm not trying to say anything against fundamentals. In a normal market, it is long term fundamentals that will beat out the market. This hasn't been quite the normal market for the last several months though has it? The best investor has to be willing to change when the market does. That is the investor that will be the first to make cash money.