Charting/Technical Analysis

[gfp]

yes, the utility is not about what already happened.  It is about what the pattern, when broken, predicts for the immediate future.  value bros love to hate on chart patterns and any number of other techniques but most value bros underperform the indices for their entire careers while expecting to be paid for their genius.  Chart patterns are useful in helping decide when to wait, when to increase or decrease position size, when to sell aggressively, where to set clouds of multiple limit orders, etc.

[gfp]

Here's another one for the Saint Joe crowd.  Why it was significant that JOE closed off its lows three days ago ->

 

[dpetrescu]

I wasted more than 5 years of my life and life savings blinded by technical analysis. That was a long time ago. At some point I read Mandelbrot’s famous book and it changed my mind. 
 

Even today I sometimes think - if I’m going to keep buying one company for the rest of my life - why not also invest in and out a little in that same company with TA. Luckily I haven’t acted on this urge. We need a program for TA like AA.

 

Like the famous renowned actor and psychiatrist once said, “people are always deluded into thinking it could work for them but….it might just work for us”

Edited July 3, 2025 by dpetrescu

[Parsad]

1 hour ago, dpetrescu said:

I wasted more than 5 years of my life and life savings blinded by technical analysis. That was a long time ago. At some point I read Mandelbrot’s famous book and it changed my mind. 
 

Even today I sometimes think - if I’m going to keep buying one company for the rest of my life - why not also invest in and out a little in that same company with TA. Luckily I haven’t acted on this urge. We need a program for TA like AA.

 

Like the famous renowned actor and psychiatrist once said, “people are always deluded into thinking it could work for them but….it might just work for us”

 

+1!  Cheers!

[Loss Horizon]

I knew for a long time that technical analysis can not possibly work in a random walk. If you try to predict price movement based on a chart, it is always possible to find historical charts which look exactly the same to a point, where some will go up and some will go down.

 

Yet I fell for "technical analysis" in Graham's "Intelligent Investor". He described cyclical ascension and fall of the market around some average value. I under invested in stocks in the last 10 years, because the market has been "overvalued" for so long, and lost quite a bit.

 

Edited July 4, 2025 by Loss Horizon

[gfp]

I wouldn't make decisions based on technical patterns or charts alone, but changes in market prices are determined by the decisions of people and some of those people, particularly shorter term traders and short sellers, are going to be watching those chart patterns and so breaking them will influence their behavior.  Maybe they stop selling the rallies and wait, reducing supply.  Maybe they add to their position because it looks like it's ready to move.  Shorts capitulate and close their position.

 

AAP

[Dalal.Holdings]

If Technical Analysis really worked, there would be no point in wasting time drawing lines on a chart anymore.

 

There should be an AI bot by now that tells you when to buy/sell off the chart. It should print money if the TA people are correct. Let me know if you ever find one.

[gfp]

FWIW, Sprott Uranium (U.UN) had a "technical" breakout yesterday and has re-tested and bounced today.  A good chart from a voodoo-technical-nonsense point of view.

 

26.65 CAD currently

[backtothebeach]

The theory of gap trading is that prices, especially of indices, eventually trade through every price, they don't just skip a price range. Maybe it is just randomness playing out, but for the SPX this has been pretty much true, years ago a did a quick analysis and if IIRC, there were only one or two minuscule gaps left over the last decades. One problem is that it can take a long time (a bear market) for some gaps to close.

 

This just played out over the last few days. I would say these were "exhaustion gaps". I did make a bit of money shorting daily SPY calls, but did not have the confidence to post about it, lol. I always think I'm gonna jinx it by posting. Maybe next time I'll muster up the courage.
 

Gaps closed yesterday and today:


 

Edited January 28 by backtothebeach

[gfp]

Sometimes my favorite way to use "technical analysis" or widely observed chart patterns or whatever you want to call it - is to place a bet on a chart pattern that's just too perfect and too widely observed that I think will be violated (go against the pattern's textbook result).  One mention was the very long term chart of CMCSA the other day but this one looks fun since it has a decent short interest.  Narrow line laser monopoly Lumentum - ticker LITE

 

Trade is a prediction that the chart doesn't give the H&S top what everybody is expecting and it breaks out on short covering, where I exit the trade because what do I know about narrow line lasers

 

[Spekulatius]

You are also competing with Renaissance and other similar short term swing  traders, which is a bad idea, imo.

[gfp]

3 minutes ago, Spekulatius said:

You are also competing with Renaissance and other similar short term swing  traders, which is a bad idea, imo.

 

What I am doing is nothing like what Renaissance is doing, unless you are basically saying everyone is competing with every other market participant all of the time.

 

[TwoCitiesCapital]

10 hours ago, gfp said:

Sometimes my favorite way to use "technical analysis" or widely observed chart patterns or whatever you want to call it - is to place a bet on a chart pattern that's just too perfect and too widely observed that I think will be violated (go against the pattern's textbook result).  One mention was the very long term chart of CMCSA the other day but this one looks fun since it has a decent short interest.  Narrow line laser monopoly Lumentum - ticker LITE

 

Trade is a prediction that the chart doesn't give the H&S top what everybody is expecting and it breaks out on short covering, where I exit the trade because what do I know about narrow line lasers

 

 

How often would you say this works? 

 

[gfp]

1 hour ago, TwoCitiesCapital said:

 

How often would you say this works? 

 

 

Hard to say - I'm not an academic 

 

For me, the most valuable / predictive aspect of a widely observed technical pattern is when the pattern is negated - since that is when human behavior (in the short term, obviously) is the post predictable.  The trade I outlined above in Lumentum is an example of betting against the textbook chart people (and a decent sized short interest) before the pattern is negated - but you know very close to my entry price (basis is clearly visible on the chart as the green line) when you are wrong.  So losses will be small if you are wrong and it turns out to be a textbook perfect head and shoulders top.  This trade had the fundamental backdrop of being part of the physical AI buildout that I am bullish on - in this case photonics - the high speed data communication links necessary for modern data centers.  So it fits in the broad bucket of GEV, SMNEY, ABBNY, VRT, CAMT, TSEM, BE - the semiconductor/energy end of the AI build out that I am interested in. 

 

It's a thread on technical analysis / chart patterns and I think it's probably more useful for people to understand what happens (in the short term) when a widely observed pattern is broken than it is to say "this is a head and shoulders and you should be short like all the other chart bros."

 

It's the type of trade I've done for many years and it is based on a 26 years of experience with this type of thing.  They don't all work out of course but this one was right at the neckline when I posted it and it has so far produced a 13% profit in one trading session so we'll see how this one goes.

[Spekulatius]

On 1/27/2026 at 9:29 AM, gfp said:

Sometimes my favorite way to use "technical analysis" or widely observed chart patterns or whatever you want to call it - is to place a bet on a chart pattern that's just too perfect and too widely observed that I think will be violated (go against the pattern's textbook result).  One mention was the very long term chart of CMCSA the other day but this one looks fun since it has a decent short interest.  Narrow line laser monopoly Lumentum - ticker LITE

 

Trade is a prediction that the chart doesn't give the H&S top what everybody is expecting and it breaks out on short covering, where I exit the trade because what do I know about narrow line lasers

 

Th am you for explaining you trade rationale. Always interesting to see your approach.

[gfp]

On 1/27/2026 at 8:29 AM, gfp said:

Sometimes my favorite way to use "technical analysis" or widely observed chart patterns or whatever you want to call it - is to place a bet on a chart pattern that's just too perfect and too widely observed that I think will be violated (go against the pattern's textbook result).  One mention was the very long term chart of CMCSA the other day but this one looks fun since it has a decent short interest.  Narrow line laser monopoly Lumentum - ticker LITE

 

Trade is a prediction that the chart doesn't give the H&S top what everybody is expecting and it breaks out on short covering, where I exit the trade because what do I know about narrow line lasers

 

 

The chart no longer looks like a "too perfect" textbook Head & Shoulders top and short covering is kicking in  (+26.6% at this point)

 

EDIT: And I'm out, 32% gain in 4 trading sessions with no leverage, no options, plain ole vanilla stock.  Busted H&S played out as expected

 

 

 

Edited January 30 by gfp

[73 Reds]

1 minute ago, gfp said:

 

The chart no longer looks like a "too perfect" textbook Head & Shoulders top and short covering is kicking in  (+26.6% at this point)

 

@gfp  Do you actually use charts to make investment decisions?  if so, does the chart ever do you wrong?

[gfp]

1 minute ago, 73 Reds said:

@gfp  Do you actually use charts to make investment decisions?  if so, does the chart ever do you wrong?

 

Yes and yes, you obviously didn't read the strategy here which is completely about the "chart being wrong" and human behavior being more predictable when it is.

[73 Reds]

1 minute ago, gfp said:

 

Yes and yes, you obviously didn't read the strategy here which is completely about the "chart being wrong" and human behavior being more predictable when it is.

Right; can you sum up your thesis?

[gfp]

Just now, 73 Reds said:

Right; can you sum up your thesis?

Scroll up and read it, lazy

[73 Reds]

Just now, gfp said:

Scroll up and read it, lazy

I'm always lazy when it comes to technical analysis.  

[gfp]

So LITE is now trading at $445, up 35% in 4 trading sessions.  Up 17% on just today.  On short covering on the busted technical pattern. 

[gfp]

On 1/27/2026 at 8:29 AM, gfp said:

Sometimes my favorite way to use "technical analysis" or widely observed chart patterns or whatever you want to call it - is to place a bet on a chart pattern that's just too perfect and too widely observed that I think will be violated (go against the pattern's textbook result).  One mention was the very long term chart of CMCSA the other day but this one looks fun since it has a decent short interest.  Narrow line laser monopoly Lumentum - ticker LITE

 

Trade is a prediction that the chart doesn't give the H&S top what everybody is expecting and it breaks out on short covering, where I exit the trade because what do I know about narrow line lasers

 

 

This bad boy is now a double from the busted Head & Shoulders top.  In 3 or 4 weeks time...  Narrow line width laser monopoly + short covering + momo boys...  I sold for a quick gain but I certainly wasn't expecting 100% in less than a month

 

[backtothebeach]

The S&P500 left a gap a couple weeks ago that still needs to close. With SPY the gap is 725.04 to 727.83. Any ideas how to play a SPY pullback to $725 or below with options - without risking too much?