ChartWatchers

STRONG TECHNICALS?

Chip Anderson

Chip Anderson

President, StockCharts.com

Here's what a strong techincal picture looks like:

Dow Jones Industrials

Record closes for each of the past 4 days. Steady volume. Increasing Money Flow values. Quick recovery from a recent downturn. Bullish MACD cross-over. This chart has it all!

Unless...

Maybe too many good signs is a bad sign. Maybe this baby is too "overbought" and is due for a correction. Things cannot possible get any better, right?

This is the classic problem that investors face during a bull market. Reversed, this is the same dilemma that they face in a bear market too. However, this is really NOT a problem for disciplined technical analysts. The charts are good and therefore you buy (or hold). Period. End of discussion. End of doubt.

Now sure, you watch carefully for changes in the charts and you move your stop loss levels accordingly. But until the chart changes - until your trendline is broken or your indicator turns down, you just enjoy the ride. Done correctly, Technical Analysis should remove fear and doubt from your investing, not add to it.

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More