Hey Mac I wonder if the tax man makes any money at the end of the day after all those losses are realized or carried forward
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Hey Mac I wonder if the tax man makes any money at the end of the day after all those losses are realized or carried forward
Whilst I'm not completely against the concept of TA I find some of your comments re: event probability difficult to swallow as all TA data is based on past prices and as such they are unlikely to include 'Grey Swan' events, i.e. events that are unlikely (or where it is impossible to accurately determine when they will occur) but which have a huge impact. An relevant example for PEB would be the signing of a CMS agreement. Sure like all past prices the most recent prices include a significant element of expectation however I would reason that given the nature of Grey Swan events they are infrequently priced in.
When they are priced in (as a CMS agreement may have been when the stock was around $1.70) then suddenly TA and FA are at odds, as the under FA the stock is over-priced relative to the expected return and under TA the stock may be showing as bullish (trending upwards) and therefore appear to be a reasonable buy.
As such I cannot see how these two systems are always congruent.
Another issue I have with TA (and again this can be used in the context of PEB) is that under FA (with all things being equal) a stock is less risky when its price falls, as there is less room for it to drop, and its value proposition increases relative to its price. Under TA if a stock is in decline then warning bells go off invariably tell the buyer to stay away.
For example, with the current situation for PEB as the stock came down then suddenly its a more attractive FA play as you are paying less for more upside, with the downside being somewhat migitated by an underlying "fundamental" value.
I agree that TA is probably best used the long to medium term as short-term the market is likely to be too efficient for this tool to be of any value.Quote:
Like all "big data" analysis, the less data you have the less accurate it becomes, which is why it is most useful for long term traders/investors not short term ones. (And by long term I mean months and years not days and weeks).
If you had of been watching PEB in the final week(s) before its first US contract announcement then TA would have likely told you to stay clear (except possibly for the final day). FA on the other hand may have told you that this company has rather promising prospects in the global diagnostic space, and when the Grey Swan hit those already in it (principallly FA Investors) profited more than those TA'ers who jumped in later on the up-trend. An even wiser FA investor would have sold when the stock got to $1.50-$1.70 as it seemed relatively over-valued to its peers relative to its sales performance.Quote:
TA is an invaluable tool in managing your portfolio risk and determining when to enter and exit a stock (over the long term). It is also a fantastic tool for stock selection - it enables me to choose between a list of stocks that I have as investment options (selected based on FA) and to maintain a portfolio of stocks that are in strong uptrends.
If it works then I'm glad and I like to keep somewhat of an open mind. I do think it provides a good indication of market sentiment and that is something I learnt through the DIL saga. However to be fair, looking back I now consider that a furthering of my understanding of market psychology as opposed to a simple function of a downtrend in the charts. Sure the charts reflect the sentiment/psychology but I'm now cognisant that I need to predict how market players will respond to certain events/announcements. This is something i'm actively looking to add to my FA repertoire and I think this is essentially this is what made Soros better than Buffet.Quote:
For me, the addition of TA has supercharged my investment returns. If you havent figured out how best to use TA, then I suggest you keep trying - there is definitely a place for it.
This is blatantly not true. Warren Buffet has listed the annual performance records of Graham's disciples in the Intelligent Investor and their records stack up and are far superior to the S&P returns over those periods. The only common denominator in the group is that they use 'Value investing' as advocated by Benjamin Graham. Their stock selection policies were generally quite different, and some focused on many stocks and some on a few. Some domestic and some international.Quote:
Whether a share price is over-valued or under-valued based on FA is meaningless - the market trend is what is important in the long term. The best companies can be in a downtrend, and the worst companies can be in an uptrend. You just have to know how to ride the waves so you don't wipe out, and likewise don't stay sitting on the beach
I have yet to see a similar group record for a school of TA investors.
PS: another query/issue I have with applying TA to stocks on the NZX is that these markets are dominated by larger players and based on my knowledge of the industry almost all of them don't use TA.
As such (and mentioned above) when a stock is in a TA downtrend and gets cheaper and cheaper, then this only invariably increases the probability that a fund will accumulate (as they are basing their decisions around FA valuations where cheaper is better).
I would imagine that this means TA is less effective in this market, particularly as there are relatively fewer traders on the NZX and that there is a general inability to short-stocks in downtrends.
Just a thought.
I just love these FA/TA 'discussions'. :p
Best Wishes
Paper Tiger
Globally TA plays a large role in fund managers operations
http://www3.wiwi.uni-hannover.de/For...ere/dp-446.pdf
Abstract: This paper thus analyzes survey evidence from 692 fund managers in five countries, the vast majority
of whom rely on technical analysis. At a forecasting horizon of weeks, technical analysis is
the most important form of analysis and up to this horizon it is thus more important than fundamental
analysis. Technicians are as experienced, as educated, as successful in their career
and largely just as overconfident in decision-making as others. However, technical analysis is
somewhat more popular in smaller asset management firms. What we find most significant is
the relation of technical analysis with the view that prices are heavily determined by psychological
influences. Consequently, technicians apply trend-following behavior.
OK - the paper covers 5 large markets but I would think NZ fund managers operate the same way. I know one large fund manager in NZ who has a Technical Analyst on the payroll and gets paid very well for what he loves doing. Also When I was a trustee for a pretty large pension fund the investment manager would wheel in a guy with plenty of technical analysis experience to bambozzle most of the other trustees but boy was he impressive.
Every analyst report seems to show a chart with lots of squiggly lines on them (bet even MAC looks at them) ... sort of suggests that TA is used in the organisation
What do you use as a stock screening tool for the asx, KW? I'm looking for one that screens against the following parameters:
- EPS (actual and estimate)
- P/E ratios (current, estimate, industry relative)
- Price/Book value
- Gross Yield
- Interest/debt cover
- Market Cap
- and more.
Cheers,
BC
Where do you get these screens from? do you pay for them?
1) Whilst I haven't read the above paper the sample selection may have been actively based on 692 funds that predominately use TA.
2) 692 is a small number of funds in the global (or at least 5 nation) population.
3) What kind of funds are these? If they are predominately global-macro (e.g. Currency and/or commodity) funds then I am not surprised that TA has been factored in as it about the only tool that one can use in the short-term, short of predicting weather patterns and macro-economic announcements.
4) If they these funds are simply long in stocks then what is their definition of Technical Analysis? Is this charting or actually rather 'Quantitive Analysis'?
In terms of the NZ market I know/have met several Equity analysts/Funds management people (for global/domestic stocks) and almost none of them apply TA (in the charting sense) or know anybody who does..
With regard to your comment on squiggly lines in Analyst/Brokerage reports I haven't seen any charts in any of the reports I've read from well recognised research firms. If I was reading Gold/Silver articles on MarketOracle then this might be a different story...
Closing point: There is little academic evidence/proof that TA works. Part of the problem is that it is difficult to back-test this (which is quite different to Quant Analysis which can easily be back-tested). If it did work in most scenarios then everybody would do it thereby eliminating its effectiveness.
That being said I'm sure there's some great TA'ers out there (possibly KW by the sounds of it) and much like FA there is an element of Talent or Skill applicable. I certainly don't rule it out as a useful tool to aid FA decisions and I must concede that I do look at charts/trends when considering an entry/exit however I tend to get this wrong often (albeit generally right on my long-term calls).. but then again if I got most of my timing calls right I would be a multi-millionaire rather quickly.
Commsec stock screening requires registration, which requires applicants to be Australian residents.
Anyone aware of an alternative?