Avoiding the Noise with Drugs thanks to Bristol Myers Squibb

• Posted by Greg Harmon
• on July 8th, 2015

Whenever I see someone I follow on social media talking about some thing extreme happening in the market, my first response is to pull up a chart of what they are talking about and see for myself. Quite often the writer is getting caught up in a minor nuance of a move in a stock or market.

Often because they are looking at the wrong scale, or at least not one that makes sense for me. This has been happening a lot over the last few months as the indexes consolidate sideways in narrow ranges. You get used to the S&P 500 only moving 10 points in a day so a 20 point move, about 1% becomes a catastrophe.

One way to avoid this is to shut off the noise and stay focused on your timeframe. The equivalent of giving an ADHD patient their Ritalin. Bristol Myers Squibb does not make Ritalin, but their stock chart can be used as a good example of how to avoid the noise.

The chart above shows the stock price action in Bristol Myers Squibb ($BMY) over the last 4 months. It looks like it is going all over the place. Up a few days, down a few, a steady rise then a crash lower. In fact all of the price action takes place in a 6 point range, 5% of the stock price each way off of the center at 66. But whatever the range it looks pretty scary this way.

But look at the weekly chart of the stock price over the last 18 months. It shows a totally different story. A move higher starts in November that has been consolidating against resistance with rising support since March. An ascending triangle in an uptrend. This looks pretty bullish now. And those wild swings look like nothing more than a sideways consolidation in a narrow range.

Try this with the stocks you are watching. Lengthen the period of time you are looking at and take a step back on the timeframe, from daily to weekly for example. You will sleep better and may even be able to give up your Ritalin.

Get my ebook, Markets for 2015 and Beyond, a long term forecast with all proceeds going to charity.

Want to learn more about Dragonfly Capital Views?
Dragonfly Capital Views Performance Through June 2015 Expiry and sign up here

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