zoomFinance
- Round Table Forum
July 25, 2000 11:00
PM - 12:30 PM |
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East is east, west is west and never the twain shall met |
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 RD:
I come from a strong anti-technical bias, so I'm letting you know
upfront and where I'm coming from. The main argument that fundamentalists
make against technicians is that if your 'science' works so well,
why is it easier to pinpoint fundamentalists who are worth several
hundred million dollars, while super-rich technicians seem to be non-existent?
PKH: I think that from my understanding, I don't think that
academicians are saying that technical analysts are completely wrong.
So far, academicians have not been able to prove that technical analysis
doesn't work. All that academicians are saying is that "prove to us
that what you claim is a workable tool". However chartists have so
far, been unable to do this.
LCH: I think the question is more biased towards Malaysia,
where technical analysis is a more recent art, and there are few
fine technical analysts around in KL. In the case of the first
question, a good example would be WD Gann, who was born in 1878 and
lived till 1955. Gann had a trading system whereby he actually had
286 trades in 25 market days, of which 92 percent were profitable.
He could even predict the price of cotton etc, and successfully so.
Gant was rumoured to be a very wealthy man. He even taught a master
price and time course, which he sold for US 5000 - at that time this
was quite sufficient to buy a house! So to say that technical people
do not make money is not true.
CG: I think the question on super-wealth is biased, because
if you are referring to people like Warren Buffett, he's made a lot
of money, but for every one Warren Buffett out there, there are quite
a few fundamentalists who have not made it. So it's probably not a
fair comparison. There are successful technical analysts out there.
For a long time, I was a fundamentalist until I went for this course,
organized by Dow Jones about five years ago where I found out about
day-traders, and they do quite well.
WMT: There is a lot of charting that utilizes formulas. These
may have certain parameters fixed to certain variables, but the parameter
changes with the structure of the economy and the structure of the
market. The human analyst is supposed to be able to be a more flexible
parameter. Unfortunately, or fortunately, Warren Buffett, has a much
bigger following. So of course there is a slight bias towards the
ascendancy of fundamentals analysis.
RD: When it comes to fundamentals analysis, we are basically
looking at what makes a company tick, the quality of management, quality
of the business, and the capacity of that company to grow it's business.
On that basis, you can probably assign a Price/Earnings multiple to
that potential. Then you just do a valuation. When it comes to technical
analysis, what you do is put pin-points on a piece of paper, which
creates a price chart. The most common work we hear about, Candlesticks
- the numbers are plugged into a formula, and it is supposed to give
you indicators of one sort or another. One of the key axioms of technical
analysis is that "the trend is your friend". Can you actually identify
the point at which the trend breaks, for if you can't, then this 'friend'
turns into your worst nightmare. I want to read something to you that
came from the Edge: "Based on Elliott Wave Study, Idris' daily price
trend is currently unfolding the various degrees of its corrective
wave...Its Elliott Oscillator, which staged a re-penetration rate of
its zero region, has since stayed above it...It's near term retracement
objective is at 99 sen." - excerpt from The Edge, July 17, 2000 p23.
This is not the most clear bit of prose found in The Edge. I would
like to turn to the two technical analysts to interpret this for me.
 PKH:
The problem with Elliott wave is that it allows many interpretations.
According to my understanding of his interpretation, Idris has completed
its downtrend back in 1998 at the price of 22 cents. Following that,
the stock is expected to have an A-B-C correction upwards. But this
A-B-C correction upwards will consist of three waves. Wave A up, Wave
B down and Wave C up again. At the beginning of this year, the stock
has completed the Wave A up, at the price of RM1.69, followed by the
recent low of 49 sen. The only problem is that the down wave, according
to my understanding is supposed to be Wave B, but Wave B could also
take the form of a sideways rotational triangle pattern, which means
that Wave B may not be over yet. Idris may then spend quite some time
consolidating sideways over the next few months, before it breaks
for the upside, which is targeted at RM2. But the only problem with
this Wave B interpretation is that it could be over at 49sen.
RD: If in the mid to near term, Idris' price falls to below
60 sen, does that mean that it could still be going to 49 sen?
PKH: It could, but the weekly indicators appear to be oversold,
which suggests that it is unlikely to go below 60 sen.
LCH: The interpretation of this thing says is that it could
go down to the 60 or 49 sen low, then moving back to a 99 sen high
target for a "C Wave", after which it will head down. It should not
penetrate above a dollar(i.e. RM1). |
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