Would You Buy This Stock?

[Rob]

Take a look at this chart and tell me if you would buy this stock.

[mrmarket]

I need to know its PE, its revenues for the last 3 years and its earnings for the last 3 years.

Then I'll give you an answer.

[Adman]

Not on a chart alone. Although it appears to be trending upward, I would need to know what the firm is, the industry sector, managment team, how they stack up to the peer group, recent industry news, recent company news and a quick look at the income statement.
Charts tell a good story, but the underlying fundies are crucial in making a decision.

[Rob]

Indeed

I need to know its PE, its revenues for the last 3 years and its earnings for the last 3 years.

Then I'll give you an answer.

Indeed, $$$ Mr. Market $$$, I would too! And that's the point I want to make. That is a chart of BBD from Sep. 24, 2004 to Mar. 24, 2005, almost exactly one year ago.

Look at that beautiful head-and-shoulders pattern, and look at the volume with which the neckline was busted. Nevertheless, had you bought at that point, say about $14.30, you would be sitting on a 174% gain today! Therefore, I conclude that fundamentals trump technicals in the long run.

I'm not trying to discredit technical analysis here, so much as I am trying to underscore the importance of fundamentals.

Happy trading!

p.s. And a big ditto to you, too, Adman!

[New-born baby]

No I wouldn't

Adman,
Look at that chart: head and shoulders with broken neck. I don't want it

[Adman]

Adman,
Look at that chart: head and shoulders with broken neck. I don't want it

I see that, and as I put out there when I first joined, I don't rely heavily on charts. Everyone has their own way of looking at what to buy and when.
To be honest though, I would not have gone after this, coming off a 52 week high (although, there is probably a couple of bucks left on the upside).
Take a look at CIB. I've been in there since November, at 22.08, based on the chart alone, would you sell? (I would post a chart, but I have not mastered the technique).

[DSteckler]

<< I'm not trying to discredit technical analysis here, so much as I am trying to undersore the importance of fundamentals. >>

Not that I'm discrediting fundamental analysis, but everything you need to know is in the chart (if you know how to read it). Many, many times the fundies look great but the chart breaks down and it isn't until later that the fundies deteriorate.

Go out a few more days and you'll see that BBD fell to its rising 50DMA and held there. Once the former neckline was pierced back through to the upside (4/6/05), that was the time to reenter the trade. The breakdown was around 14.65 and the break up was around 14.80, so the cost of being cautious was 15 cents.

[Lyehopper]

set the hook! SET THE HOOK!!!

Adman,
Look at that chart: head and shoulders with broken neck. I don't want it

LOL!!!!.... NBB took the bait! Rockin'Rob you and me gotta go fishin'.... IT"S SPRING DUDE!!!! hehehehe

[Rob]

Following Up

. . . you'll see that BBD fell to its rising 50DMA and held there.

That's also what I said in this post, where I said, ". . . look at how the stock repeatedly finds support at the 50-day SMA. To me that support at the 50-day is pretty hard to ignore." I'm not primarily interested in proving myself "right" about anything, just observing and questioning and trying to understand.

. . . everything you need to know is in the chart (if you know how to read it).

I might accept that as a truism, provided that it is coupled with some strict stop loss rules in one's trading strategy. I just don't see, though, how anyone could buy shares in a company without at least looking at their revenues, peer group, etc.

Rockin'Rob you and me gotta go fishin'....

Man, I wish I could afford the time. I used to fish a lot years ago.

[Gatorman]

Right vs Wrong

I don't believe we can expect absolutes in dealing with either FA or TA. At least that is not how I look at them.
NBB based his opinion on a TA analysis and was right, imho, to not buy at the stated time. FA would have told a different story but FA is not a timing tool.
I use FA to begin the search for candidates, eliminate some and winnow the rest down to those I will consider. Once I make my choice, I use TA to time the entry. Whether this is right or wrong is not the issue. It seems to work for me and to eliminate those strong FA stocks for which the entry is dubious at a particular time.
Just for what it's worth.

[peanuts]

Nevertheless, had you bought at that point, say about $14.30, you would be sitting on a 174% gain today!

OK, you've convinced me... Yes, I would buy it. ;^)

[Lyehopper]

I don't believe we can expect absolutes in dealing with either FA or TA. At least that is not how I look at them.
NBB based his opinion on a TA analysis and was right, imho, to not buy at the stated time. FA would have told a different story but FA is not a timing tool.
I use FA to begin the search for candidates, eliminate some and winnow the rest down to those I will consider. Once I make my choice, I use TA to time the entry. Whether this is right or wrong is not the issue. It seems to work for me and to eliminate those strong FA stocks for which the entry is dubious at a particular time.
Just for what it's worth.

Hey Gator! Rob ain't "anti-TA".... He's just pro-BBD. hehe

[mrmarket]

<< I'm not trying to discredit technical analysis here, so much as I am trying to undersore the importance of fundamentals. >>

Not that I'm discrediting fundamental analysis, but everything you need to know is in the chart (if you know how to read it). Many, many times the fundies look great but the chart breaks down and it isn't until later that the fundies deteriorate.

Go out a few more days and you'll see that BBD fell to its rising 50DMA and held there. Once the former neckline was pierced back through to the upside (4/6/05), that was the time to reenter the trade. The breakdown was around 14.65 and the break up was around 14.80, so the cost of being cautious was 15 cents.

I don't discount charts. But how could anyone know what will happen to a company's business, based on what they see in a chart??

[New-born baby]

I don't discount charts. But how could anyone know what will happen to a company's business, based on what they see in a chart??

MM,
What happens in a business and what happens in the market may not be the same thing. For example, XOM. What a money making behemonth! And yet the stock just sits there at $60, undervalued by about 50% according to Vector Vest. Or look at TOL, KBH, and BMHC. They have the huge earnings, but the market is not rewarding them.

Furthermore, from my viewpoint, we don't always know what is happening in a business because the reported numbers may not be accurate. We only know what they tell us.

I think FA is valuable. It helps us identify companies which are going to move up. And the TA is valuable because it helps identify when to get in and when to get out.

[DSteckler]

<< I just don't see, though, how anyone could buy shares in a company without at least looking at their revenues, peer group, etc. >>

A good point, Rob, but it depends upon your time horizon. Somoene looking for a swing trade doesn't care about that stuff. A position trader obviously would care.