Honestly, Zzzz1, a better way to have played the banking stocks prior to the election was to protect a position with options which you are more familiar with than I am. However, I am not an expert on options so currently I dont use them in my trading. I am posting this in the interest of having a healthy discussion about risk and TA and how they worked for me in a situation like this and why I think all that is known is priced into the stock price. Can there be a black swan event (like unexpected election results) that sends markets crashing? YES and I will explain my thoughts on that below. I entered a LONG position in BAC on 10-19-16 @ $16.31 because I saw prices making higher highs and higher lows as well as other aspects of a probable impending breakout above $17.86. Notice the Daily chart showing that prices were near support of the rising trendline on 10-19. Actually, I was a bit late to the party but it I set my stop loss at $15.99. Notice that prices continued to climb and my first upside target was $17.86 ($1.55 above entry). I was risking $0.32 to win potentially $1.55. Thats a R:R of 1:5. I also expected that if we broke out above $17.86 my next upside target was $20 and third target was $23.20 and last upside target is $32. So this to me was a risk very well worth taking. Notice the price increased to $16.94 on 11-8 the day of the election which happens to have been a NEAR 52 week high for BAC. My stop loss was now moved to $16.09 on an already profitable trade. On the Monthly chart notice that prices were forming a Cup and Handle formation which is a very basic bullish formation in TA and if you like it also was making a rising wedge price formation. This is also a bullish formation. Also, the top of the Cup and Handle was resistance level at ~$17.86. That happens to be my first upside target of my rising trendline on the Daily chart too. The ONLY bit of fundamentals I took into account on this trade is that rates were due to rise in December and be a positive for banks. So far I had no reason NOT to take the trade. I would not call this a coin flip. I think no matter WHO won the election Banking stocks were going higher. I think the aggressiveness of the rise was due to the election outcome but these were poised to rise no matter what. But what if I am wrong? So Election Day comes and I am already in a winning trade and lets say instead of POPPING 5% in BAC on 11-9-16 we had a drop of 5%. Well, that would have stopped me out at $16.09 and instead of losing 0.75% of my account I would have lost about 0.52% of my account. That is hardly a trade that would put me "in the shitter" as you say. I do not ride losers. So on 11-8-16 I was risking open profits and up to 0.5% of my account on what I felt was a >90% chance of a rising price. There was absolutely ZERO weakness in those charts on 11-8-16. I think in the future I will incorporate more options to protect these types of positions but I still have plenty to learn in that department. I hope you at least see that there are many ways to skin a cat and using charts is not necessarily a bad thing. I believe price takes everything known into account. Is TA for everyone? NO. I think you have to have a certain kind of mindset and thousands of hours of watching prices and the patterns they make before you can trade this way. But that is probably true of the way you trade too. I doubt most people could trade the way you do and "consistently take money from the markets" by just practicing a few weeks. I am extending an "olive branch" of sorts here so I hope we can agree to disagree on this subject. Happy Trading, Eganon
You make lots of valid points, even though we indeed need to agree to disagree on the basic premise. But I appreciate the effort you put in to explain your stance.
Just curious why didn't you enter a trade in early April when it reached the first support? I was looking at BAC at the time and also right after Brixit and felt it was really cheap based on fundamentals and in terms of relative value comparing to its peers. Appreciate your insights.
In this chart you posted, I think I recognized, or shall I say understood your point. The moving averages crossed over, after a period of higher highs and lower lows. Then there was a small up tick then a test of the 50d MA then a huge up swing. Would the entry point have been the first uptick after testing the 50d MA?
I have a couple of moving averages up but do not use them as an entry signal; does that count as "100% technical"? I use the DOM/Tape and a footprint chart to enter trades. Might not work in the equity markets but seems to work well in futures.
To be good at fundamental analysis requires a person to research all of the relevant economic, financial and other qualitative and quantitative factors pertaining to a particular name or security. And indeed, if done thoroughly enough that would make the analyst a true expert on that particular security's intrinsic value. The issue, as I see it, with fundamental analysis is that you are pretty much limiting yourself to a very narrow set of names or one industry sector at best. Now, if that is highly profitable for you then by all means rock out with your cock out. My view is that technical analysis, when properly applied and in context to market conditions, allows the trader to participate in a great many more markets than the legitimate fundamental analyst. And for many traders, that might be a more effective path, especially since electronic access to markets is so robust.