Point and Figure Charts May Disagree With Experts On Stocks

by | Apr 18, 2009 | Asset Management, Point and Figure, Retirement Planning

Lately, I’ve been getting calls from some folks who are asking questions like:

“Why didn’t we buy GE at $7?”
“Why didn’t we buy Citibank at practically zero?”
“Why didn’t we…blah blah blah…”

Many of these same folks were screaming “Make it stop!  Make it STOP!” only a few months (and in some cases, just a few WEEKS) before.

Human behavior is a great source for comedy routines.
Look, many people in my line of work want to over-complicate this stuff.  They want to talk over your head and use jargon to confuse you, and perpetuate their existence.  I know, they send “fan mail” to me all time.

Basics.  Just basics.  Look at pictures.  I use point and figure charts to help manage your money. I would like to acknowledge the use of these charts from Stockcharts.com.  You can check them out here.

Would you buy anything that had a pattern like this?   Now, before you answer, scroll down a little and look at the second chart (below).

Would you buy this pattern?

You know this company.  They “bring good things to light…”

The only time I would think about buying a pattern like this would be if it were incorporating writing (selling) covered calls against the stock.  Otherwise, yecchhh…
That’s just way too much risk for me.  Do me a favor.

Read the next line carefully:

The definition of RISK, as a verb, is “to act in spite of the possibility of injury or loss.”

I don’t know about you, but that first chart looks like risk to me.  Take a look at the next chart.

Amazing?  NO, AMZN (Amazon)

The picture is heading in a completely different direction than the first picture.  Yes, it is heading up!

OK.  But you say…

“I don’t buy stocks.  I only invest in mutual funds.”

Or, perhaps you are saying…

“I only have 12 different mutual funds to choose from in my 401k plan at work.”

Charts are charts.   It really doesn’t matter if we are looking at a chart of a mutual fund, a stock, or the price of gasoline. I look at the charts in your 401k plan on a continuous basis. If none of the charts are going up, here is our plan: we stay on the sidelines.  Pretty simple.  No need to be a hero.  This is money you will have to LIVE on some day.  (You’re not counting on social security, are you?)

Today’s Lesson: Buy things that are going up.

That’s an important lesson!   And a lesson MOST people overlook, or forget.
So, good job.
Now take the rest of the day off.

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