Thursday, June 16, 2005

Big Picture: Chart of the Week

The Big Picture: Chart of the Week: Dow Jones Trading Range

Another great chart posted at the Big Picture. I thank Barry again because a good chart is worth more than 1,000 words.

The chart shows the Dow locked into a trading range--don't fall into the trap. Many an investor will attempt to sell at the top of the range and buy at the lower band. The problem is that they will sell out or buy-in right when the break out occurs.

Consistent short-term trading success is as rare as winning the lottery. Don't fall into the trap!

Barry's take away is different from mine. He suggests, like many a technician, to wait until the break out occurs and then jump on the market. This approach leaves one with cash just in-case the market breaks down instead of up. Historically these type of calls are too tough. Those who stay 100% invested in markets like this one will do well. Those who trade in and out will miss much of the big move.

I mentioned earlier today that my GLW has moved from $2 to better than $16 in about three years. Another big mover has been AMTD. We have held it from around $4 to over $15. When the recent ET offer for AMTD was made, some said it is time to hit the bid but we continue to hold. The offer has been increased and both ET and AMTD are trading up in this wonderful market.

I have missed a lot of winners. I played the oil market poorly, never owned a share of Apple and have not traded semiconductors smartly. However, we are hanging in with large unrealized gains this year on top of the great returns compounded since October of 2002. We are off the peak levels reached a couple of weeks ago but we are not far from net new high values.

When the Dow finally breaks-out of the trading range, my family will be riding a long list of bucking broncos. We don't know which ones will run the fastest or the farthest but when the Dow Breaks our accounts will not fall.