some technical comments - positive, page-14

Couple of quick amplifying points:

For Unhedged: Thanks for your complement. I'd be pleased to add a chart if I could, but I can't find a way of lifting a copy off my programme. I'm looking into it. The commentary has to be, for the minute I'm afraid, verbal.

For TP: You wrote (TA), " ... I sometimes wonder about their relevance in these very small speculative stocks. They seem to be driven more by rumour and news to me."

Just remember that TA is simply the visual representation of what you, and I and hundreds (or, perhaps, thousands) of other people are doing with the stock we're examining. The market is not driven by FA, otherwise all stocks would go to their NPV and stay there until some new bit of information came along to shift it.

Right now we're talking about BKP. We know it's got a great story, one that - for those of us who are holders of the stock - will propel the size of our investment into much higher reaches if all goes well. So what are we prepared to pay? Four weeks ago you could have bought them for 1.7cps. Right now (1055 Thursday, 2 June 2011 - my birthday, BTW) you'll need to pay 2.4cps. The spud date is still a little way from being known to us; it's closer, but it's still unknown to us. What's changed? Human emotion, human sentiment, that's what - fear, greed, expectation, risk tolerance, doubt, concern, hope - any other trading/investing emotion you care to name - it's all there on the chart - a picture (and I won't trot out the old '1,000 words' trick ... Uh! - I just did) of what's happening with the stock.

All those emotions are not found in annual reports. They're found in our reactions to them.

You further wrote (about small stocks), "They seem to be driven more by rumour and news to me." I agree ... and the charts give us an instant piccy of what we are all prepared to do (or not).

As you know, since the 25th of March, BKP's SP has moved between 1.8cps and 2.3cps (setting up strong support and resistance lines). Yesterday and today, the SP hit 2.4cps - a breakout from the resistance line. Time for a new set of decisions. How far and how quickly might the SP climb? What's the big picture (I'm a believer in 'peak oil)? I've got no precise idea where it'll go, but the SP did spike to 3 cents on the 9th of March. If I draw a horizontal line at that level then the SP is likely to head towards it. You have a 'box' (Read Darvis's book, "How I made $2,000,000 in the Stock Market), and the SP will likely move between those two levels. Break out from 3cps and you're faced with the another new set of decisions.

These 'boxes', otherwise known as support and resistance levels, have been around us since the beginning of time. Second-hand cars, bananas and iPods all find their levels within them.

It's fascinating and profitable. TA allowed me to make 11 straight profitable trades on another oil stock (another good story: if you haven't by now guessed, I marry FA and TA; show me a good shape, I'll check the FA and then, if the story's good, I'll head back to TA pricing to get me the entry level and timing). Those trades tripled the size of my holdings in that stock - no margin loan, either. Lots of ups and down to play with.

Charts just tell me what people are doing. I never buy blue chips (nothing above 40 cents), so I'm not able to comment subjectively on the big fellas. However, if you'd like a really instructive single indicator to work with, just run a 30DMA over the top 16 stocks in the market; buy when above the line and sell when below. You'll make a quid.

Just one final point; it's TA that sets up stop loss levels. It's the Fundamentalists who weep when something like the GFC halves the value of their portfolios, "But," they splutter, "that can't be right. My stocks are below their cash value. That's just NOT right!"

It can be said that the real gamblers in the market are the 'buy and hold' mob.

We techos are long gone - our stop loss levels having converted our holdings to cash .... waiting, waiting ...


(Stops in place, always.)
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