How to predict the stocks charts for the coming days to weeks?

[drbeta]

My friend and I are trying to make a list of the possible drivers where we can base our predictions on for the stock charts. So far we have these;

- Past stock charts performance (Patterns/trends)
- News events
- Market bias
- Professionals opinions

Can we add more driving factors that can cause a chart to go uptrending or downtrending and that can help to base our predictions on?

Hopefully anyone can help us add to the list! Thanks very much

 

[barjon]

mmm, whatever you use it's not possible to predict with any certainty. All you can do is make assumptions and your job is to take adequate advantage when those assumptions pan out and limit the damage when they don't.

 

[drbeta]

mmm, whatever you use it's not possible to predict with any certainty. All you can do is make assumptions and your job is to take adequate advantage when those assumptions pan out and limit the damage when they don't.

Yes I know, but we also want to make good/accurate assumptions so that in most cases our assumptions pan out. So thats why we were looking for underlying drivers of the charts. So why do we assume the chart to act in a certain way next month?

We have to have reasons why we assume a chart is going to uptrend or downtrend right? So we are looking for the potential reasons/drivers we can base our assumptions/predictions on.

So for exampe the last 11 months the charts were up. Then because the cirumstances are still the same, the chart will probably go up in month 12. Then theres in the news the company has a lawsuit and some professional traders and lawyers expect the company will win the lawsuit in month 12 and also expect it has an even more positive effect on the stock price then most assume. Also the market is bullish. Then our assumptions are all very positive.

However, maybe we are missing some drivers from other directions here that might also influence our stock chart for the next month. Can we safely base our assumptions on the short list we have now? Or should we make more assumptions based on other factors then the 4 in our list?

For example, maybe we can use competitors charts in a way to make assumptions for our companies chart?

For example, if companies x charts shows high correlation with our company's chart every month (when they are up, we are up and the other way around). And professionals are now expecting this company x to fall in month 12, because of some reason we as beginners dont know. Based on this our assumption for our companies nexts months chart is negative. So then we want to know, why they believe this company x is going to fall next month to know if this wil affect us also.

Does this make sense in any way? Again, we are clueless here, when we think about it this way it makes sense, but we dont have experience with this, so thats why ask the pro's Thanks!

 

[malaguti]

Yes I know, but we also want to make good/accurate assumptions so that in most cases our assumptions pan out. So thats why we were looking for underlying drivers of the charts. So why do we assume the chart to act in a certain way next month?

In the same fashion of newton's law of motion, it is said that a trend is more likely to continue thats why you can assume the same over a period of time, but a trend has ups and downs. Its unimportant what happens from one month to the next, whats more important is you can identify the trend and then look to get in at an opportune time with a way of knowing that the trend has ended and your decision was wrong. why the fascination that one month/week/day you can correctly gauge its direction? surely its more important that the direction is up and therefore you should not be shorting it and then assume ala newton that this will continue

We have to have reasons why we assume a chart is going to uptrend or downtrend right? So we are looking for the potential reasons/drivers we can base our assumptions/predictions on.

why? if the stock is trending up. why do you need a reason? You are just looking for confirmation that its in an uptrend, yet there it is staring at you in your face..just seems odd to me. It either is, or it isn't. Apple was going up, yet its fundamentals weren't that good, Steve Jobs quits/dies and yet it still continues. what rationale will you give it? That investors reacted positively to its founders death? Follow CNBC or any news channel today stocks are down due to the unrest in gaza, tomorrow stocks are up due to the same story or some other rubbish..what happened to the unrest in gaza? its still there. truth is nothing can adequately explain the two and fro of investors sentiment from one week to the next, to one month to the next. Yet somehow you want confirmation?

So for exampe the last 11 months the charts were up. Then because the cirumstances are still the same, the chart will probably go up in month 12. Then theres in the news the company has a lawsuit and some professional traders and lawyers expect the company will win the lawsuit in month 12 and also expect it has an even more positive effect on the stock price then most assume. Also the market is bullish. Then our assumptions are all very positive.

Jobs dies, what would be your assumption? a new tablet is launched, what would be your assumption? Likely the reverse of whatever you were thinking..as in the case of Appple (just an example, there are just too many to disassociate news with direction)

For example, maybe we can use competitors charts in a way to make assumptions for our companies chart?

better you assume the sector direction for its ultimate continuation rather than an individual stock unless its weighting in the sector is very high

Does this make sense in any way?

of course it does, its making sense of the market and market sentiment thats the hard part. You can always find a reason why something did or didn't go up, but its all there in the chart. First just get the direction part right, then look for the appropriate timing, have an exit strategy and a way of locking in whatever profit you may have.
You can always wait for a trend to develop, nobody says you have to guess its direction one week/month to the next. you don't win any prizes for being correct.
Wish you all the best though, and please don't take this as disagreement to your strategy. Its your strategy and nobody can take it away from you least of all me.
Two people can have totally different strategies and still both walk away happy :clap:
And if my opinions differ from anybody else's, its all just an opinion..except mine will be the right one of course:whistling

 

[drbeta]

Hey Malaguti, This is helpfull. If you say its for the most part in the chart itself, then I guess I will start with the charts first. Thanks again!

 

[barjon]

............Yes I know, but we also want to make good/accurate assumptions so that in most cases our assumptions pan out............

No, you're trying to turn an assumption into a prediction

Think of "prediction" as a one way, definitive conclusion " the share will go up" and an "assumption" as a possibility "the share may go up" which immediately generates IF questions which require answers.

ie: IF it does go up I will do x - IF it doesn't I will do y.

Sorting out those x and y actions should be occupying much more of your thought than the prediction/assumption element, imo.

 

[drbeta]

No, you're trying to turn an assumption into a prediction

Think of "prediction" as a one way, definitive conclusion " the share will go up" and an "assumption" as a possibility "the share may go up" which immediately generates IF questions which require answers.

ie: IF it does go up I will do x - IF it doesn't I will do y.

Sorting out those x and y actions should be occupying much more of your thought than the prediction/assumption element, imo.

Yes I think you're right. Its the X and Y's that we were trying to find. But I guess Malaguti now made clear that you can find the X and the Y's in the chart staring at you. So I guess we will then focus on the charts with technical analysis.. I also read this somewhere. This is close to what Malaguti is saying right?

Why stock prices fluctuate daily? Rather than understanding why stock price fluctuate daily, it is better to understand human psychology. in stock market, greed and fear drive stock prices ups and downs. though there are economic indicators (like inflation, interest rate, corporate earnings etc.) that able to explain on certain price movement, others still and will remain hidden. nobody in the world can explain exactly what happen in the stock market and what causes the stock price fluctuations.

that is why, technical analysis came into picture. though it is very subjective topic, but certain human behaviors will remain the same; greed and fear. the price movement somehow able to reveal some pattern that reflect to human 'greed and fear'. given an example, they buy when they 'feel' the stock is affordable and sell when they 'thought' the stock is already over-valued; with something in mind to buyback when the price drops later.

if you are serious about trading stock, these are the topic that you need to go deeper. as each stock has different 'type of player', its pattern will be different to another stocks. stock charting software able to help you to do the analysis, but to me nothing beat human intelligent; which is why it still need your 'human judgement'.

however, if you are incline to invest for long-term, daily price fluctuations is the last thing you will ever to consider. instead of betting in 'human behavior', you are investing in profitable businesses. however, selecting profitable businesses is crucial than if stock traders, selecting stock with 'high beta' is more than important.

 

[barjon]

..................So I guess we will then focus on the charts with technical analysis............................

Fine, so long as you treat TA with the same suspicion. ie: it is not predictive ,but it allows you to make reasonable assumptions. What counts is what you do after that.

 

[drbeta]

Fine, so long as you treat TA with the same suspicion. ie: it is not predictive ,but it allows you to make reasonable assumptions. What counts is what you do after that.

Ah ok, thanks for that Barjon! Then I will probably ask more questions about the assumptions I make and what to do next soon Thanks

 

[gerryg]

Answering to title question best method for me is support and resistance levels. Every other stuff (patters I mean) is build using this two basic principles. But actually they are enough in their basic form to use it in full power: