In the Markets, You Will Find What You Are Looking For
- Posted by Greg Harmon
- on February 28th, 2014
It is 5:02 pm Thursday as I started writing this and the lead story on the financial news channel in the background is “Big Investors Flee Apple.” Apple stock ($AAPL) was actually up on the day almost 2%, but I can give them the benefit of the doubt. It has been floundering for a while and well off of its highs. But what makes this more interesting to me is that this same day the S&P 500 and Russell 2000 Indexes closed at new all time highs. 8 minutes into the show its all about Apple and nothing about record stock index levels. Wow! The floundering S&P 500, unable to break through 1850 for weeks was the big media story prior. Did this signal a top? A reversal lower in the very near future? Once a new high was made that story gets thrown away.
It is no surprise to many that there is a bias in the media and I am not trying to pick on anyone. But this example serves to show that no matter who you are, no matter what your bias, you can find supporting data in the markets. This is the hardest part for most new students or casual observers of Technical Analysis (TA). If you focus on what you want to see you will be right some times and wrong some times. It is fine to be right and continue to find supporting data. It does not hurt your account value. But when you are wrong you will be very wrong and continue to find data that supports your view. This can lead to rejecting TA outright or not trusting it. But TA is not about looking for one small message in the total price action. There are many messages and good TA looks for all of them to paint a mosaic of the the flow. But good TA goes one step further. Good TA also understands that the mosaic message in the charts can also be wrong or overwhelmed by exogenous factors. So great TA takes that mosaic as a possible map down the many slopes of the ski hill, not like the defined bobsled course that never changes.
Keep an open mind. Build mosaics. Be ready to reject them in an instant. That will make you a better technical analyst or trader.
Get my book, Trading Options: Using Technical Analysis to Design Winning Options Trades from Amazon.
Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through February 2014 Expiry and sign up here for the free 7 day trial before you pay.
If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
- Premium Earnings 3-31-15
- Stock screens reinforce bias, but charts don’t lie
- A clear way to trade Fairway
- Premium Earnings 3-30-15
- Top Trade Ideas for the Week March 30, 2015: Bonus Idea
- Top Trade Ideas for the Week of March 30, 2015: The Rest
- Top Trade Ideas for the Week of March 30, 2015: The Rest Premium
- Top Trade Ideas for the Week of March 30, 2015: The Best
- SPY Trends and Influencers March 28, 2015
- Macro Week in Review/Preview March 27, 2015