Andrew Allentuck

Saturday, February 22, 2003

The Technical Analysis Course
by Thomas A. Meyers
287 pages
ISBN 0-07-138710-2

Technical analysis is the rubric term for charting stock prices by price and volume to develop indications of trends that the charters think revealing. Mr. Meyers, who, the cover blurb says, "is an authority on using computers for investment research and analysis," shows how to construct charts, set trendlines, work on moving average convergence/divergence indicators and Bollinger bands, examine volume reversal, price oscillations, and more. The explanations are clear, there are chapter end quizzes with answers, a good index, a list of recommended books and a glossary.

Technical analysis is regarded by fundamentalists, the crowd that follows earnings and accounting, macroeconomic indicators, international trade trends and so on, as numerical voodoo. To the extent that technical analysis works, it depends on daily and weekly pricing. If it were to use minute by minute trade data, which is available, it would drown in statistical noise. If it were to use moving 52 week averages, the price lines would be so smooth that there would be little to notice save for major trends such as the rise of the semiconductor industry.

Professional commodity traders make substantial and often profitable use of technical analysis in their constant swapping of pork bellies and orange juice contracts.The assumption that all knowledge is already in the market and expressed by trading, does not work for common stocks that are more subject to the vagaries of world trade, war, interest rate changes and disclosures of scandal than are pork bellies.

The investor who wishes to learn technical analysis will get his or her money's worth out of The Technical Analysis Course. Making it predictive is another issue.