charting - analysis for the intelligent investor - blair 2003

[...]... they 8 chapter 1 The art of the chart have bought it, then more of the shares should be bought Many people want the fun and satisfaction of investing their money directly instead of handing it over to a unit trust manager They do not have the time or the ability to appraise an investment so that its prospects are beyond doubt at the time they put their money into it Moreover, they know they have these... wait for the share price to fall Assuming it does, you would then buy the shares in the normal way at the lower price and immediately sell them at the higher strike price to whoever had sold you the option (the option writer) In fact, in the traded options market you don’t go through the rigmarole of buying the shares and selling them to your option writer Instead, the market simply pays you the profit... real time The chart started with an upswing Soon, the word, BUY flashed out close to the bottom of this promising development Then the chart turned down Immediately after the peak was made, the word SELL started to flash away from it Another two centimetres along the banner, the chart turned up again, with another mesmerising BUY tag Now the chart went through the top of the banner This time, the advice... timing – the matter of whether the market as a whole is soundly valued or not It’s relatively easy to compare two shares and come to a conclusion about whether one looks significantly cheaper than the other But what if, while there is a worthwhile disparity in the two shares’ values, both, and all the other shares which form the background against which the decision is being made, are over- or under-valued?... selling their shares at that price and preventing them from advancing past it, until they’ve sold out At the same time, other investors who sold out at 820p to 850p on that sharp pullback in January are disappointed that they sold too early These investors decide to buy RTZ back if ever the shares come down to their selling price In March, they get the opportunity They have set up support Now, there’s... oscillation between the two camps In the low 800s, out come the buyers who were disappointed not to have had the full run For months, they can be relied upon to come back and support the share price at that level But as the price approaches 900p, investors who have seen this price before and failed to bank it aren’t going to pass up the opportunity too often in the coming months There they go in April... time) Nonetheless, it allows you to back your judgement that a share price is due for a fall (or a rise) Call options are the opposite of puts: they work in exactly the same way and are used by people expecting a share price to rise If you think the price will fall further than the difference between today’s price and the strike price (and by more than the cost of the option), then you can buy the put... for the shares in question Figure 1.5 shows an example A technical analysis of this chart might run as follows: Investors who held the shares all the way up to 900p in January 1994 are, by March, disappointed that they didn’t sell at the peak It’s been a memorable run and that nice round figure sticks in their minds They resolve to sell if ever they see it or anything else close to it again These investors... previously they required considerable effort or expense to obtain Accordingly, I was pleased to be asked to update my book and add the new Chapter 11 to guide you to the best charts on the internet However, apart from this Introduction and the Further Reading section, the rest of the book is relatively unchanged This is because the subject matter is relatively timeless The method of calculating MACD is the. .. putting long-term money into a once-in-a-lifetime discovery such as the small companies’ effect, unless he could get in before the market latched on to it By contrast, the huge quantity of money that went into attempts to capitalise on the small companies effect was after the event Nonetheless, it is true that a good signal, which has worked often, will start to fail if everyone begins to use it The chartist . Delhi Madrid · Paris · Amsterdam · Munich · Milan · Stockholm Charting An analysis for the intelligent investor SECOND EDITION ALISTAIR BLAIR INVESTOR S GUIDE TO PEARSON EDUCATION LIMITED Head Office: Edinburgh. development. Then the chart turned down. Immediately after the peak was made, the word SELL started to flash away from it. Another two centimetres along the banner, the chart turned up again, with another. at the Investors Chronicle and Amanda Thompson at Pearson for their help in producing this second edition. Alistair Blair August 2002 T he art of the chart 1 Fundamental vs technical analysis The