Sunday, December 13, 2009

Does Warren Buffet know technical analysis?

Does Warren Buffet use technical analysis? The answer is: No. I have not read anything that suggests he takes the help of charts for his investing.

How many Warren Buffet type of investors exist in the world? I think, not many. Therefore, it is not neccessary to compare our work with that of Mr Buffet.

Technical Analysis for Long Term Investors

An investor can benefit from the use of technical analysis for her investment decisions.

Long term charts can identify many patterns.

(a) Stocks in parabolic rallies. You should wait for corrections before entering.

(b) Stocks in trading range. These are stocks you may wish to track on lower time frame charts for breakouts.

(c)  Stocks in deep downtrends. These stocks should be avoided till they begin to form bases, or succeed in tests of support.

(d) Stocks in visibly defined uptrend. Such stocks have a pattern of higher highs, higher lows. These are the stocks that you will be investing in.

How about exits?
That requires another blog post.

And, a list of stocks?
Well, you need to do yur own homework. But, I will gladly offer my comments on any ideas that you have.

Cheers.

12 comments:

VIKAS said...

Hello sir,
How can we play on Nifty now?
1.On Daily charts, its in some Box range of 5180-5140 odds.."testing upper channel more times as compared to the testing of lower band" & On weekly chart, it has formed Last Engulfing Pattern for the week ending December04(pl correct me if I am wrong in identifying the pattern,being novice).
2. If it is essentially to trade on breaking of any side..Should the trade be intiated right on breaking the Box range(of course with sum filters) or Should b waited till closure on daily basis..
Hope you throw light before the future gets unfold in next week..
Thanx a lot..
With utmost respect,
VIKAS SHARMA,Ludhiana

data said...

Sudarshan Sir,
I am one of your BIG fan and self inducted student who follows you and in debt to you. After reading your blog for the last 3 months my Loss in Trading and frequency of whimsical trading have reduced by 70%.

I have analysed the recent Nifty price action and requesting your view on the following.

----------------------------------
DOUBLE TOP in NIFTY may be on the cards which signals reversal pattern.
1. 16-Oct-2009 NIFTY close 5142.15 FIRST TOP.
03-Nov-2009 NIFTY close 4563.90 (8.9% Retracement)
Within 2 Months on 08-Dec-2009 NIFTY close 5147.95 SECOND TOP and not able to cross it on a closing basis.

2. Support is at 4935 to 4955 level. NIFTY may come and test this support. If this supports breaks decisively with High Volume, we will get a free fall till (5145-4945) = 200 Points, upto 4745.
After testing 4745 Nifty may again come and test 4935-4955 level.Then we will get another shorting opportunity. All these in point two may happen during first two weeks in Jan’2010, when market will have to deal with the 3 quarter results.

3. If NIFTY closes above 5148 then uptrend is presumed.We will be in the range of 5210 to 5400 for atleast 1 week.

4. There may be dip below 5080 for more than 30 minutes intraday next week starting 14-Dec-2009 to suck all the Retail LONG and lure SHORTERS.Be careful.

Please correct all the wrong statements which I made.

Thanks…

Alok

Rohit Sablok said...

You mentioned (along with every other TA ) that dollar index will affect stock markets particularly in Asia.

Dollar has strengthened a lot (around 3%) and currently above the downward trendline which it has been follownig for six months.
Despite this there has been no affect on our markets. Why this anomaly? Shouldnt we be selling off? whendo you see nifty breaking this range of 4940 -5182?

v4u said...

hi sir
sudarshan gi
want your email id
if u can

kk said...

RESPECTED SIR
YOU MENTIONED WARREN BUFFET IN YOUR POST . I THINK WARREN BUFFET IS NOT AN EASY NAME. THERE IS ONLY 1 WARREN BUFFET IN THIS WORLD,AND EVEN HE EVEN DIDN'T KNEW THAT HE WILL BE A WARREN BUFFET

IN THE VERY STARTING OF A CAREER ONE DOESN'T WANT TO BECOME A WARREN BUFFET , ONE JUST NEEDS TO UNDERSTAND THE MOVEMENT OF THE MARKETS , IT'S PSYCHOLOGY , IT'S SENSITIVITY

AND I THINK FOR THAT TECHNICAL ANALYSIS IS YOUR BEST FRIEND

pi said...

Its been some time since we've had a trend... mkts been range bound now for quite sometime; except for the brief driftdowns that is met with sharp buying which brings the mkt up with large intraday breakouts which fizzle out after 60-80 points..

same is the case on s&P..

do you have any research on increase in probabilities of trend days after such action?

how can one play on such actions?

also people in western mkts track and follow things like vwap or look at areas where most volume has traded? do such concepts work in our mkts ? as in are they tradable ?

pranav said...

Dear Sir,
According to you, how many points one should gain in a year in exclusive nifty trading to be called as successful trader???

SWEETY said...

Hahah.. sudharshanji, Talking hard truths... yes, this is bitter & but obviously better for my money.

Regards

gourv said...

Hello Sir,
You are absolutely right.I dont know why people talk about Mr buffet when ever the issue of Technical analysis comes into picture.He is a different type of business man whose work is to buy companies and hold them foe ever.The only common thing of his work with that of the technical analysis is that both work in the Stock market.But anyone who use simple technical analysis can get more return then his holding.For exp one of his holding company is Sanofi Aventis (NYSE: SNY) on Jan 2007 its price was 40 rupees and now also it is same.if some one would have used 20/50 SMA crossover he/she would have sold his position @37 and would have gone short which he could have recoverd @ 29 and would have bought his new position.Any simple technical analysis like the 1 above would give more result in any stock then a simple buy and hold strategy.

Regards
Gourav

technicaladviser said...

sudarshan ji,
i will not agree with ur viewpoints on long term investing as compare to warren buffett. a weak or a cyclical stock may show strong charts for some period of time .and a gud investing stock may show weak charts.but a gud business will keep on increasing its value and the stock after yrs of sleep may rise.it is better to recognize gud business ,wait patiently for correction decide a price and then forget it.
thanks

Swingtradingideas said...

Dear Sir,

You are right TA can also be used for long term investing. I vividly remember about Hindalco. You talked about it in March 2009 and you mentioned that its trading at 2002-2003 levels and is making a very long tipple bottom pattern on Monthly chart. I still remember you saying on TV that you have bought this stock. I also had a look at the monthly chart and bought at 56 (above the high of March 2009)with 30 % of my quantity with stop at 36.75 ( close below monthly low of March) and kept on adding by following weekly chart ( I added when stock pulled back to 20 DMA on weekly). Now my trailing stop is one tick close below 20 WMA on 100% of my quantity. I used TA for long term investing .All this was possible because of use of TA and the path shown by you.
TA not only helped me to buy a stock for long term but it also helped me to decide my exit and entry point. Once again the credit goes to TA and your teaching.

gulshan said...

A rectangle in Rel Capital
Zandupharma forming basing points
Unitech is making H&S.

Please share your views.