Do Charts Tell The Truth? Or Do they Lie?

What Is OCC Saying?

Some people live and die by charts. Others could care less. Some others dissect each and every piece of technical analysis by adding layers and layers of studies and mathematical models. Others go the accounting route and dissect a company’s balance sheet in the hopes of uncovering some piece of information that they believe no other human can.

All these are human characteristics, all with the aim of finding a gem, a stock that can make big money. And yet, there is no holy grail. The reason is quite simple. We are human and we fall for human tendencies. Therefore, to be successful, we must act and behave and approach without using our human tendencies.

Let us suppose that you belong to the group of humans that lives and dies by charts. But not so heavily involved or interested in all the technical analysis and mathematical models. That is because you want to be an excellent decision-maker. To make the best decision at any given time, in real-time, you must have an uncluttered mind. Decision-making should be simple. And the rules should be simple and your approach in the market should be simple. There are just too many cross currents at any given time to let our stupid human minds to make judgements because the mind will say different things on different days.

Let us suppose that I prefer to be a fool and foolishly want to keep my life simple and just look for clear and simple messages. Because, in the end, it is the big money that moves the markets. Despite what the news may say or an article may say, retail investors are not the ones moving the market. They are being used and influenced by the insiders and led to make certain moves via various forms of media.

So where can we find an unbiased, just-the-facts-M’am, type of message about the stock? Where is there support or buying, where is there resistance or selling? And the support and resistance levels are not firmly fixed. Depending on where the stock is in its journey or what the market conditions are or what the insiders of that stock know, the support and resistance levels can keep on moving.

While keeping things simple for making an easier decision-making process is a fair approach, there should be some acceptance that everything the stock is saying via its chart is a lie. Or some of it is a lie and some of it is the truth. Or sometimes everything is the truth.

So, you see, no matter what the approach the risk is ever present. That is the reason even a great stock could land us with a loss. And even a lousy stock or company can make a profit. But the really big money is made only on select few stocks. So, if one must take the risk and enter the world of stocks, why not seek out what seem like the best prospects that offer the best chance for the best profits?

There are a ton of very nuanced skills that go into a winning stock market operation. In your own profession you have come to understand that what you knew as a novice and what you know now as a professional is the wide array of nuances that you have mastered along the way is the key difference.

Let us keep things at the basic level and see if you can learn to listen to a stock. Knowing full well that everything it is saying could be a lie. Or the truth. Or somewhere in between. See if you can look at the charts below and answer the questions posed on the chart to yourself before reading the interpretations listed below the chart.

As we should keep things simple, it is clear that no trend has been established. Yes, there is an explosion in volume as the price erupts. Ok, so an eruption has occurred. No trend has been established.

The novice will want to jump in. In a bull trend there could be a hundred such moves in a few months. The temptation to day-trade or swing-trade will be a dime a dozen. But is that where you make the big bucks? The big money and the big commitment is not possible on such short-term plays. A lucky shot here and there is always possible, but no chance for a consistent set of opportunities for big plays.

The only one clear message is that the true trend has not yet been confirmed.

This stock is definitely on your watchlist now. But just because it is on your watchlist does not make it actionable. At least not yet.

Since enough clues have been offered, for the rest of the charts, try swimming on your own and check what your decision-making skills lead you to.

Timing is everything. The right stock at the right time for the right duration. FOMO or fear of missing out has killed more trading accounts than anything else. Being early kills trading accounts.

Maybe, the trend has been finally established. But is this an actionable stock at this point?

Some stocks and their charts are useful as they offer a learning experience. Now that you know that is this Optical Cable Corp (OCC) and a current stock, what do you think it can or will teach us? Some stocks are small and sometimes we cannot put big money in them due to their market capitalization. Therefore, what if the exercise below is used instead, a big stock and much more of a chance to put big money in. But can you make the right decision at the right time?