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a real-time "tick" graph that charts the movement from minute to minute, it is pretty clear after a while how these support and resistance numbers affect traders. |
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So, our main point here is that the concepts of support and resistance may be useful to longer-term investors, just as they are used by active traders, to help plot entrance and exit points, and to have a way to help make sense of a stock's movement. |
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Now, like anything else in the securities markets, the concepts of support and resistance will hold for muchbut not allof the action that takes place. There are limitations to all the charting concepts used by technicians, just as there are obvious limitations to the traditional fundamentals when applied to Internet companies. |
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No onewhether they were using technical or fundamental analysis, computer programs, phases of the moon (some were saying that the fact that the moon was 100,000 miles closer to the Earth on December 23, 1999, closer than it had been in 120 years, made for the surge) or anything elsecould have predicted an astonishing 86 percent gain in the NASDAQ for the year of 1999. The normal valuations applied to Internet and selected high-technology Stocks went out the window. Typical resistance points were blown through as if they never existed. The market showed us something toward the end of 1999 that no one had quite seen before. It left long-time Wall Street watchers and seasoned traders shaking their heads in disbelief. |
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Which all goes to prove what? That the market has a mind of its own. And sometimes it belies and perplexes even the most sophisticated computer programs that we can apply to it. |
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In Gestalt psychology, this is stated as the concept that "the whole is greater than the sum of its parts." As applied to the market, we can take this to mean that no one individual can possibly grasp all the pieces of the market puzzle at once. As we said, we are always being forced to make decisions on limited data. No one person or group can control the whole market (on second thought, maybe Alan Greenspan can). But the forces of individual traders, fund managers, large institutions with computer programs, foreign investors, short sellers, options investorsand every other human and material aspect of the market, through their respective complementary and opposing actions, together create an entity that is larger than the sum of all the individual parts. |
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All patterns that are used to predict future movement of a particular stock or the market as a whole are based on the notion that the |
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