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Technical Tools That Work

Posted By Barry Ritholtz On October 14, 2005 @ 8:27 am In Financial Press,Technical Analysis | Comments Disabled

Yesterday, Gary B. Smith [1] made reference to my Delphi comments on Wednesday [2] (thanks for the kind words, G-man).

My key takeaway in this discussion — one that is easy to overlook — is the simple fact that technical analysis is a tool. Whether you choose to avail yourself of it or not is up to you. But I do not understand the insistence by some that it is of absolutely no utility whatsoever to anyone anywhere for anything.

That is simply a false statement. It may have little utility for Cody’s model [3], and that’s fine, but that does not invalidate it. 

I’ll let you in on a little secret: Jim Cramer is a closet Technician (he doesn’t even know it). Cramer is very aware of breakouts and break downs, talks of stocks trading "heavy," intuits relative strength or weakness; He also is quite conscious of trends.

These are all tools of the Technician.

Like other tools, there are craftsmen who do astonishing things with them. I may use a knife to spread butter on toast, while others use similar intruments to carve ice or perform open heart surgery. 

If you find any particular form of analysis (technical, fundamental, quantitative) that provides you with a way to improve your performance, that’s terrific. But I find it hard to understand why people are so dismissive of a tool that so many bright people have demonstrated a personal skillset with — one that makes them money.

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URLs in this post:

[1] Gary B. Smith: http://www.thestreet.com/p/_rms/rmoney/techforumrm/10247001.html

[2] my Delphi comments on Wednesday: http://bigpicture.typepad.com/comments/2005/10/fundies_blew_de.html

[3] Cody’s model: http://thecodyblog.blogspot.com/

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