Your Own Personal Investment Research Department

Your Own Personal Technical Research Department

If you don’t know where to start looking for investment advice, we suggest you check out two websites: Stockcharts.com and Yahoo Finance. Stockcharts.com lets you see if your investments are going up, down or sideways. Looking at charts to attempt to predict future price direction is called technical analysis. Yahoo gives you the numbers you can use to check the “fundamentals” of your investment and will be presented in another section.

Stockcharts.com
It is said that a picture is worth an thousand words. Charts are pictures of a stock’s price movement over time. Add a formula here and there to the prices and you get what is called technical analysis. Technical analysis can give you an idea of where a stock price may be going in the future. There are many technical tools and great formulas behind them but you will not necessarily need the know them. JUST LOOK AT THE DIRECTION THE PRICES AND LINES ARE GOING IN THE PICUTRES!! Are the lines going up (which is good), are they going down (which is bad) or sideways (which is the time to wait to see if the lines will start up or down).

If the lines are at the top of the chart and going sideways, they are “topping” and getting ready to go down. If the lines are at the bottom of the chart and going sideways, they are “basing” and getting ready to go up. For beginners, just look at the direction of the lines. Up is good. Down is bad. If the movement is going sideways, the stock is thinking and you should wait to see if it will be going up or down. Don’t worry about the stuff below until you get more acquainted with the concepts.

The Sharpe view on Stockcharts.com usually shows up first. It shows 3 three different chart pictures. The top is the RSI. It is a relative strength index that compares the stock price to a market index. What you need to notice is whether the line is going up, down or sideways and is the line at the top or bottom of the page. When the line is at the bottom around 30, that is the time when it’s likely to go up. When the line is at the top of the page above 70, that is the time when the stock will eventually go down.

The bottom chart is called MACD. It compares two or three things but you don’t need to know what they are. JUST LOOK AT THE PICTURE. Are the lines going up or down and are they above or below 0. The other thing to watch is whether the black line is above the red line. If black is above the red line, that is good and up. If the black line is below the red line, that is bad and down.

The middle chart shows the price and 2 moving averages. Look at the chart and see whether the lines are going up or down or sideways and whether they’re at the top or the bottom of the chart. You know the routine by now-up is good, down is bad and sideways is thinking and you should wait to see which direction it will go. The moving averages have a tendency to be support lines (where prices stop going down) when the stock price is above them and resistance lines (where prices stop going up) when the stock price is below them. Over the decades, 50 and 200 day moving averages have become generally accepted, and proven, measures to use. They don’t work all the time but do work often enough to consider using them in your investment plan.

If you are a long term investor, have a plan with long time frames before selling, or don’t want to bother spending much time watching stocks, you can go to the PERIODS box beside the UPDATE at the top left side of the page and change daily to weekly. Weekly shows 50 WEEK (1 year) and 200 WEEK (4years) moving averages. When your stock goes below these, as most did last year, you should take action. Checking the weekly periods should be done by every investor occasionally. This is especially true when the market is going lower like it did in 2007 and 2008.

Your Research Department
The three different chart pictures act as research departments. They show a likely price direction (aka a TREND). When your YTD percentage reverses, you can look at the charts to see if they are confirming your YTD percentage reversal and you should take action. If 2 of the 3 charts show the same reversal in direction at about the same time, it is likely a change in direction is coming. If you are in doubt as to whether to buy, wait for further confirmation before acting. If you are in doubt as to whether to sell, you should probably sell. It is better to have small profit than to let your gain turn into loss. Don’t get upset with yourself. Everyone makes mistakes in the beginning. The trick is to keep mistakes small. As these tools become more familiar to you, you should become more profitable.