Mitch Dumke Jan 16, 2011 D.A.

Davidson Rob Patterson Road Trippin with Technical: A Chart Story Two dads both work for Dumke Derivatives and Dividends as stock analysts and are both considering taking their family on a good old-fashioned road trip across the United States to the same destination (return). However, there is a difference between the two fathers, one analyzes companies technically and the other fundamentally, hence both have the same destination in mind, but they have very different approaches and considerations in deciding how to get there. The technical approach to stock analysis is highly empirical and reliant on anticipated trends. In driving, a father would consider flow facts and previous experiences with the car (company): How has it performed in the past (stock price)? How often does it break down (miss earnings and dive)? Does it fix quickly (bounce back)? How fast does it accelerate and slow down (Bollinger bands)? How many other people have bought/sold this car (RSI or volume)? The fundamental father would approach things differently. He would consider the stock facts of the car: How big is the gas tank (revenue)? What s its gas mileage (ROE)? How are the tires (management)? How big is the car (total assets)? How much luggage and how many people does it hold (debt to equity)? How expensive is gas (operating cash flows)? What will make it go faster (investing cash flows)? What are the car payments (financing cash flows)? Needless to say both fathers have approaches that overlap in assessing the quality and performance of the car, but the metrics and indicators are different.

Whenever I picked a bad stock or a poor time to sell. Two indicators that I generally analyze when analyzing a car are the MACD and Bollinger Bands. especially when the short-term is below the longer-term MA. I can generally correlate it to downtrend in the moving average. . which generally the fundamental father will rely on more. with intuition only as our guide. Occasionally we look at a company in our portfolio and aren t sure if we should hold onto it and MACD could have made that decision easier.Additionally both fathers need to consider the quality of roads (economy. MACD would have helped us realize the swing in signal and that an upward trend was emerging. luckily our decision was delayed and it began to move up. At the beginning of our class we had COH on the chopping block to be sold. MACD is important to me because it takes a long and short term moving average and puts them in correlation to each other. I believe this should be used in determining the whether to buy or a sell a stock today. Technical analysis is generally used for short-term decisions that suggest the direction a stock price will move. industry. competition) that the car will take.

Like a car that has to stop and go in traffic. but a potential for short-term gains. the Bollinger bands might help signal when the price could be expected to do so. a stock price that is constantly accelerating only to slow down again may not be the most attractive for a long-term hold. but can still be helpful. . So as one dad chooses to fundamentally travel towards his return . This metric is more a secondary consideration to determine timing. I ll take a trip with technical and stay trendy. If we believed a stock was going to break through a resistance.The second indicator is the Bollinger Bands.

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