AusGroup

I counted 9 attempts at searching for information on AusGroup in my blog. So, here is a TA for those who are interested:

AusGroup had a sell signal on the MACD on Thursday. In the near term, price seems set to go lower. Initial support is at 69c, a many times tested candlestick support level. The cluster of rising 20dMA, 50dMA and 100dMA, all within close proximity of each other, should limit downside to 66c which coincides with the 50% Fibo line.

MFI, a momentum oscillator, shows an uptrend in buying momentum as it formed higher lows and higher highs. The OBV shows gradual and continuing accumulation. Seemingly, this counter has support and a probability of a severe downward movement in price is low.

With buying momentum intact over the longer term, breaking 74.5c, the recent high, is a matter of time. That would give an initial target price of 78.5c as provided by the 123.6% Fibo line. Accumulating at supports would give a potential gain of 12% (buy in at 69c) to 19% (buy in at 66c).

Risks and rewards: TA and FA.

In an article in Investor's Business Daily on 7 Jan 09, Alan R. Elliot wrote:

"One of the most common mistakes among investors young and old: never bothering to learn to read charts. Yet the price and volume action shown on charts is a critical tool."




The long and short of TA is to determine resistance and supports as the basic idea is that we should sell at resistance and buy at supports. This is in conjunction with trend analysis. For example, if the trend is up, everytime the price falls to support, generally, it's good to accumulate.

Then, we want to look out for chart patterns which might hint of trend continuation or a trend reversal. In TA, it is always important to seek confirmation in the following session after a signal, either bearish or bullish, manifests itself.

I know of people who have paid thousands of dollars to take up courses in TA and I can't possibly do justice to the subject here with a short post. Investopedia is a very good free online resource and I've provided a link in a box labelled "RESOURCES" here in my blog.




In the same article, Alan went on further to say that "other investors suffer from the opposite weakness: not knowing how to analyze fundamentals. That is, they don't know what to make of sales, earnings, margins and other financial data. So, if there are areas of financial reporting you haven't gotten your arms around, make 2010 the year you master them."

If a person bought some stock without any knowledge of fundamental analysis (FA), he could make some money depending on TA as he trades the psychology of the market.

If a person has no knowledge of TA, he could also make some money gunning for undervalued stocks.

If a person has no knowledge of either, he is going in with 100% risk. If a person has knowledge of both TA and FA, his risk is not 0% but it is much reduced.




What about depending on professional analysts, you may ask? My answer is to do your own research. This gives you confidence in your decision and allows you to hold with conviction.

If an analyst says "BUY", use that as a starting point and go look through past financial reports and announcements made by the company. Compare with peers in the same sector. Look at the macroeconomic and geopolitical conditions. Consider financial or any other trends which might have an impact.

Then, decide if the company is fundamentally sound and if the prospects are good. If you have a green light, use TA to determine a fair entry point. I must have mentioned this a few times before and it sounds really quite simple. Of course, it's not. It entails some hard work.




So, if you have yet to learn FA and/or TA, it's time to hit the books. You will find it all worthwhile.

Related posts:
1. Rich Dad, Poor Dad: 2 are better than 1.
2. Recommended books for FA and TA.
3. 5 rules for successful stock investing.
4. Secrets of Millionaire Investors.
5. Little Book of Value Investing.