I understand where you are coming from BS but rather than looking for 'slim jims' and inverted cup handles, I tend to look for consistent earnings performance, low beta, low debt/equity, low P/E, and a discount to book or at least a low multiple depending on the sector.....analysis, to me, means crunching financials for the past 5 years or so, trying to determine how well management is using retained earnings to grow the business, trying to assess management's strength, project future cash flow, and potential for future earnings growth in the given market sector.
Chart analysis on the other hand......it is essentially trending....you are trying to see a pattern to a variable that is based on market sentiment and news, not necessarily on the company's financial strength or future earnings....a true investor who buys a sound company can totally disregard daily fluctuations in the market because he is buying the discounted future cash flow of the company. I've tried to make sense of Kevin Haggerty and Dave Landry from tradingmarkets.com and I've tried to understand their strategy on trading.....but they are just that - traders.....and I'm not saying a guy cant make a shitload of money trading.....but for every guy that makes a shitload of money trading, at least 4 less-astute aspiring traders are going to lose their ass ....perhaps even more. And mind you, there are many very rich.....filthy rich people who speculate.....there are many who hedge their investments with options.......but I believe that they are not in the same realm as a stalwart investor who is looks 10 years down the road with his investments.
I believe Buffett once said "You should assume that you can only make 20 trades in your life and allocate your portfolio accordingly" - the mindset is quite different than a fellow who wakes up in the morning and glues himself to his workstation looking for an opportunity to ride a momentum swing.....again, there are very successful people that do it.....but there is as much 'gut instinct' in such endeavors as their is analysis.
And let us look at another consideration, we know that the efficient market theory is bollocks because if it was not influenced by random factors, then one could spend a few months writing software to manipulate the market - anything that can be predicted with certainty is subject to manipulation - but the market is not efficient, and randomness is a key trait; market sentiment is a factor that cannot be quantified down to a finite level. A general level, yes, but I dont think anyone can explain why the less astute 'investor' is willing to pile on a dogshit stock that is worth nothing only to ride the wave up, and then take the corresponding plunge over the falls as the stock crashes on its head.....Buffett once discussed the behavior of lemmings and drew parallels to the behavior of the markets.
Now another consideration - if you are following the same trending methods as 10,000 other day traders, if you use exactly the same techniques as those that are being learned by countless others in the world simultaneously, then at some point, the method has to fail, because someone will break out of the herd and use a methodology contra to what is generally accepted as valid and then leave those who used the method of analysis suffering with a certificate that is worth little. This parallel of course applies to day and swing traders moreso than what I believe you are talking about - examining the efficacy of an option with a 2-3 month expiration as a company gradually loses its market capitalization.........I can see this as requiring more of an investor's method of analysis than a speculator's analysis as such a decision would have to be made on countless factors including the financials and perhaps the activities of insiders and institutional holders........but reading a 3 minute tick chart looking for the 'inverted cup handle' or the 'slim jim' does not, to me, constitute 'technical analysis'. Rather, I consider it looking for patterns in a picture.
I agree that the typical person on the street should pump their money into mutual funds or buy a popular large cap unleveraged company and dollar-cost average monthly......those who throw darts at the wall would probably fare better taking their money to vegas and throwing craps. And I also believe that if someone has a knack for speculation and trading....and has found success in doing so, then he should probably put his full effort into it. Lefevre's 'Reminiscences', though loosely fictional, is a wonderful read about trading and indeed, one who swings a big line and has the pulse of the market can go from dead flat broke to richer than all hell in a matter of a few minutes.....this is a skill or an intuition that few possess and I prefer to sit back on the sidelines and admire those with the capability rather than to try my hand and find if I possess the right traits
As you said, it doesnt matter how you get there as long as you get there.
