CHARTFAIL: How Amateur Chartists Get Gamed

why amateur stock market traders fail

If you are an amateur in the Technical Analysis game, know that besides charts, there are many factors that impact the prices, and that predicting on the basis of charts alone leaves you with a 30%-50% chance of success.

I will not elaborate much on this because there are at least 6-7 factors that impact stock prices – besides the technical charts.

Here’s just one example that will help you understand the importance of analyzing other data before making a trading decision.

why charts fail

Here is the Ultratech Cements Chart. Note the price movement between 31-7-18 and 9-8-18.

It was all systems go and the stock was looking very bullish. (See Indicators and price action)

Now, see what happened immediately after:

why chart reading fails

The stock just fell off a cliff.

An amateur or an arrogant experienced chartist will give you the standard nonsense – Bhav Bhagwan Che (in Gujarati).

There was a massive underlying reason.

Now check this data:

take insider deals into account while analyzing charts

During this period, the promoters were selling stock.

In the bullish period, they sold off 7,80,000 shares!

And that’s a huge, huge number for Ultratech, considering that it is a 4 figure stock.

But the price kept on going up despite the news.

Why did this anomaly happen?

Were operators rigging the price? Unsure, but possible.

Was the retail investor prodded to buy? Oh, yes, you bet:

Centrum Report of 19-7-18

General Consensus of Analysts on 19-7-18

ICICI Securities Buy Call of 19-7-18

TV Expert’s Buy Call on 30 July 2018

TV Expert’s Buy Call on 7 August 2018

So while the retail investors, chartists and newbies jumped into the stock, the management kept selling.

Everything was legal, no laws were broken.

What was the end result – chartists were proved wrong, retail investors were left holding the baby, and promoters sold at 4400 levels.

Summing Up

Like I said earlier, charts alone do not cut it, and if you are an amateur or beginner relying on charts alone, you will pay a price.

Perhaps you already are….

5 Comments on "CHARTFAIL: How Amateur Chartists Get Gamed"

  1. Excellent analysis Sunil sir. Thank you.
    Does this mean, promoters (even big promoters, so-called honest, credible) are joining hands with brokerage houses and analyst to push the price up so that they can sell it higher? If we go by the patterns, seems like something is going on here. It is time for a retail investor to get smart and dump all cheating promoter stocks, and dump forever.

  2. rsi was also giving hint for -ve divergence.

  3. Could you please tell us, where to check the above buy/sell data?

  4. excellent and informative.

  5. Therefor,What is the way, to success ?

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