Resistance is futile

Thursday, 14th June 2012 14:10 - by Moosh

If you aren’t familiar with statuses like ‘oversold’ and ‘overbought’.. and you’re sat there with a topsy-turvy trading/investing history where a lot of the time you end up being caught buying at the peaks and end up selling at the lows of short-term trends, perhaps resistance to learning a little about technical analysis is futile. Take the case with Kalimantan Gold Corporation (TIDM code: KLG), between July 2011 and April 2012 there were two reasonable opportunities for making a short term gain – each time the trends were associated with ‘imminent’ news items relating to forestry permits but still, entries for those trends could easily have been garnered through the use of technical analysis. Here are the details using only two indicators – ultimate oscillator (UO) and slow stochastic oscillator (SS): 1. UO bullish divergence for the lows of 8-11 August 2011 and 12 October 2011, both lows occurring when SS was oversold. 2. 10 November 2011 saw a high of ~7p when daily SS was very overbought and this peak produced a hidden bearish divergence signal compared to the price peak from 21 April 2011. 3. UO bullish divergence for the lows of ~11 January 2012 and ~16 February 2012 (again with both lows occurring when daily SS was oversold). 4. UO and SS bearish divergence signals for the peaks of 13 March 2012 and 2 April 2012. So it’s as simple as that – 4 sets of observations for 2 short term trends. Obviously the signals might have been false, but a robust investing strategy should account for such instances. I understand that a lot of these posts may seem clinical and sterile in their shortness but technical analysis isn’t something that can be jazzed up into paragraphs of prose – that’s the point. It’s a chart which should take a matter of seconds to look at and a few minutes to process in order to work out when an appropriate time to trade is. Interpolating from George Orwell’s ‘Animal Farm’...... all trading days are equal, but some trading days are more equal than others. So, is resistance to change futile?