Gary B. Smith is on Fox Business News as a frequent guest analyst and he also is a regular commentator on a show called "Bulls & Bears". His nickname is "The Chartman" because his expertise is picking stocks by just looking at their charts. Thats it....he doesn't care what a company does or anything else about it....he only cares about its chart.

Since I have never picked a stock solely on the basis of what the chart looks like, I can't personally vouch for whether a person can really make money over the long term that way. But one thing I do know, if you invest only on the basis of a stock's chart, you will be doing a lot of short term trading and you better keep abreast of what is happening on a daily basis because one break in the chart's pattern means you need to sell or buy.

Can buying and selling stocks purely based on their charts really be called investing?  I guess it can because the definition of the word mentions only that you put money to use with the expectation of making a profit. But if charts are the only way you pick stocks, it sure seems like you need to devote a tremendous amount of time to the endeavor because it isn't easy. Charts have an endless number of patterns and interpretations and mastering a winning strategy seems to be out of reach for most investors.

Interestingly, in Gary's latest article, he talks about investing for his daughter's future. I don't know what their ages are and he doesn't say but based on his age, they are perhaps between 10 and 18 years old. Does he talk about teaching them the charting process and daily grind of chart analysis? Nope. Seems like he prefers the old long term buy and hold a solid stock method for his daughters who have many years ahead of them before retirement.

He picks two stocks (ExxonMobile and Waste Management) because they presumably will stand the test of time and be around for the next 50 years. Putting stocks you know are solid picks in your portfolio seems to be what he would suggest for own daughters. That has to make you wonder about the validity and difficulty of his preferred investing style of chart analysis.

Again, I know some people are able to make money in the stock market just by analyzing charts. However, for the vast majority of investors, that seems like something that is just not feasible because of the complexity and the high number of hours it would require to learn. For most people, it is best just to pick good companies, buy their stocks, and watch them grow over the long term.

No comments: