Time Can Change Nothing
Stockscores.com Perspectives for the week ending December 2, 2005
In this week's issue:
I was having dinner at a restaurant tonight and watched a classic boxing match between Rocky Marciano and Roland LaStarza. This fight occurred in 1953 but despite the effects of time, did not look much different than a match of today. Admittedly, I know very little about boxing, but it seemed that it was simply a contest between two pugilists bent on hurting the other just as Mike Tyson might aspire to do to an opponent today. The more things change, the more they stay the same.
Many might suggest that the stock market is very different today than it was 50 years ago but I would argue that it is much like boxing. The basic principle is the same.
It would not be hard to see that this boxing match was fought in a different time than we find ourselves today. You only needed to look at the crowd and how every man in the audience wore a hat to notice that it was not fought at Caesars Palace recently. The stock market today has many things that are different than in prior times, the most notable being the effect of technology on how transactions are made and information is disseminated.
But one thing that is absolutely the same today as it was fifty years ago, and I expect, will continue to be the same in fifty more years, is the underlying motivation of the stock market.
That one consistent fact is human emotion.
In my opinion, the best book ever written about the stock market was written in 1923 by Edwin Lefevre. Reminiscences of a Stock Operator is a fictional story about a real person who was a market trader and how he rose to extreme success and failure a number of times in his life. This book is such an essential read for traders because of its focus on human emotion and discipline and their role in stock market trading success.
We may be able to always find a fundamental reason for a stock to move, but have you ever noticed how good news does not always move a stock up and bad news does not always drive it lower? It is the mindset of the market that is so important in how information is judged that the information is often not that important. Crowd behavior and the predictability of it are more important than any news release can be.
The point I want to make is that becoming a successful trader requires a focus on what has always been and what will always be. There are countless books about stock trading that miss the point. To be successful in the market, you have to understand how humans behave. To beat the market, you have to be one step ahead of the crowd.
Stop trying to understand the difference between a stochastic and an RSI, or a Quick Ratio and a Current Ratio. Instead, focus on what motivates us to respond with fear and greed. Look inward to understand why you sell when you do, and why you are no different from the average investor out there. To beat the market, you have to be different than average. If you are a normal human being, you are destined to fail as a trader.
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We have all heard the expression, "where there is smoke there's fire". In the stock market, the smoke is volume, and where there is abnormal trading volume there is often opportunity. An increase in volume can mean that the crowd is taking notice of the company and buying interest may increase. By combining a search for Abnormal Volume using the Stockscores Market Scan with chart pattern reading, good opportunities can be found.Back To Top
1. TXCC
The Sentiment Stockscore is not quite where I normally like to see it, but this stock's pattern is nice enough to consider. Today TXCC is breaking its downward trend line with good volume support out of some low volatility trading. Rising bottoms over the past six weeks indicate that optimism is building. Support at $1.45.
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References
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Disclaimer
This is not an investment advisory, and should not be used to make
investment decisions. Information in Stockscores Perspectives is often
opinionated and should be considered for information purposes only. No
stock exchange anywhere has approved or disapproved of the information
contained herein. There is no express or implied solicitation to buy or
sell securities. The writers and editors of Perspectives may have positions
in the stocks discussed above and may trade in the stocks mentioned. Don't
consider buying or selling any stock without conducting your own due diligence.
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