Thursday, June 3, 2010


When I proposed the story for Tuesday's column, my editor grilled me on how the charts can show anything when news totally dominates. After all, if there ever were a group of stocks more on the hot seat with the gubment than Halliburton, BP and Transocean I'd like to know.

Anyway, my answer was that news does trump the technicals but that does not mean we cannot use the charts to make a little money.
He said - corn goes up in a drought until it rains. I say, true, but the coming of the rain is not a surprise and not everybody picks up on the weather forecast at the same time and in the same way. The early adopters leave clues.

So do stocks. Wasn't everything hunky dory in April 2010? Jobs coming back, companies making money, debt contagion still on that side of the pond, etc.... It was so good that sentiment was wildly bullish.....

You get where I am going. There were clues in place before the peak and there are clues even in charts of pollution spewing about to be nationalized oil companies. (OK, I exaggerated a little).

Here is a chart of Halliburton. We shorted this one in Quick Takes Pro on the technical breakdown May 6 (before the flash crash set in). Not shown is the 50-day average breaking that same day.

Since we are a daily report, we could not tell anyone to cover at the close Tuesday or at the open Wednesday. Our automatic 5% stop from the extreme low kicked in Wednesday and we exited with a cool 24% profit.

I may be down on technicals as I long for the good old days but they still work - even in news-driven stocks - as long as we understand the environment.

Fat crayons rule!

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