Let us take a look at MTQ for a real life example of "under-valued stock" and does chart reading help in making buying decision for TA cum FA investor?
Mr Bolton is mainly a fundamentalist, but uses technical analysis which helps in timing and size decisions. 'If I'm looking at a stock that has done well for seven years, I look at it differently from one that hasn't done well,' he says. 'A stock that has done well has most of the good news in the price. If things change, there are lots of profits that people can take so investors are likely to suffer on the downside.'
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Stock Market - A Greater Fool Theory?
Look at the shaded portion in the chart for price and volume action. It is telling us that many buyers had already bought them very cheap and awaiting to sell to the greater fools. If you look even closely at the price and volume actions after the shaden portion, it has been trading in low volume. It is telling us the earlier buyers have not been able to find greater number of greater fools to sell.
I still like what Anthony said: 'A stock that has done well has most of the good news in the price. If things change, there are lots of profits that people can take so investors are likely to suffer on the downside.'
Look at the chart, does it have evidence of good news in the price?
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