Fundamental books/texts for technical analysis?

[SlickFazzer]

My skills in this area are sub-par.

Besides "One Shot One Kill", --
(my plug for JNetto), what books
would you recommend on this topic?

Thanks.

[Hal01]

Japanese Candlestick Charting Techniques, A Contemporary Guide To The Ancient Investment Techniques Of The Far East. By Steve Nison

[TJMAXX]

Japanese Candlestick Charting Techniques, A Contemporary Guide To The Ancient Investment Techniques Of The Far East. By Steve Nison

Is this for real-- you can't tell me you actually believe this shit other than the extent of pavlovian conditions inside trading rooms... hal?

[Hal01]

Is this for real-- you can't tell me you actually believe this shit other than the extent of pavlovian conditions inside trading rooms... hal?

Are you saying you don't use technical analysis as a component of/in your trading decisions?

[TJMAXX]

Stocks: No.
Forex/Commodities (yes, but only to see what the others are looking for in very short term...)

[Rudy1957]

Some people think technical analysis is total voodoo, while others think the market tells all, and will ignore any fundamental analysis in their thought process. I don't subscribe to either extreme. I think data from both camps is more valuable as a team than as individual strategies.

On the surface, it might seem that there are close parallels between financial analysis and sports handicapping, and in some ways that's true. But the technical part has important differences, mostly because the sports handicapping markets are thinner and more volatile. In wagering market handicapping, a small handful of influential players can dramatically move the market, while in the financial markets that influence is significantly diluted. In other words, it is much easier to see what the "smart" money is doing in wagering markets than in the financial markets.

The problem with purely fundamental securities analysis is that it's tough to accurately judge exactly what expectations are already priced into a security, and how much a change in expectation to be more aligned with your hypothesis will affect price. There are a deceptively large number of variables.

The primary trap pure technicians fall into is being overly influenced by groupthink. Most time-tested technical systems, like candlesticks, aspire to catch the trend-following moves and aren't as good at catching inflection points. As such, in a whipsaw market like we have presently, technical traders are mostly struggling. When a trend is strong, such as it was during the decline last fall, technical traders stayed mostly on the right side of the market.

To me, the value of such technical strategies is mostly as a risk-management tool, being a reality check on my fundamental thinking as a hypothesis plays out. Mostly, I use technicals as part of an exit or adjustment discipline rather than as an entry indicator.

One trap pure fundamentalists can fall into is to think they're smarter than the market. Of course, in order to consistently outperform the market, one must side correctly pretty often. But stock prices respond to more variables than can be accurately forecasted at the front end, macro and micro. Which is a big reason for a diversified portfolio, and why it's hard to forecast future stock prices. If focusing too much on the micro story, the macro is naturally short-sheeted.

Here's a quick test to demonstrate: pick any stock you're interested in and you'll easily be able to make a semi-compelling case for at least 50% upside over the next year, and conversely, you can always make a decent case for at least 1/3 downside over a relevant holding period. Well, things generally don't develop so patly. I'd suggest an equally (if not more) valuable excercise is to construct the 50% upside case for stocks you hate and the 1/3 downside case for stocks you like -- it's a sobering way to help understand the opposing case.

I remember a conference call that Netto and I did with JonInOakland last spring sometime, during the period where oil prices were spiking, at that time around the $130 level and the chatter of $200 oil was cranking up. Netto, being primarily a technician, was riding that spike, presumably with one foot ready for the exit should the worm turn. I opined that fundamentally we likely were near a peak in oil because high prices eventually would result in demand detruction. Neither of us thought that we'd soon see the biggest collapse in oil prices in modern history. To be on the right side of that move required both skill sets, not just one.