Financial Technical Analysis

In this blog entry, I'd like to share my personal thoughts about the financial technical analyses produced by various stock brokerages and fund houses and experts. I don't have any personal grudge against them - they are doing a professional job for their companies. Should the traders and investors read these analyses and take the contents by the face value - my opinion would be No. As the name suggests these are analyses only and are widely variying in their nature. More often than not, the report or outlook of a company keeps changing over time. Do your own research and act on your own rather than following the reports blindly.

Every stock brokerage and fund house have in-house technical analysts who sift through various financial reasearch reports and produce technical analyses. There are television channels that are dedicated to financial news. Invariably these channels provide a running commentary on the performance of various stocks in a trading session. My personal opinion is do not read too much into the analyses produced by these so called experts and analysts. If one were to read a technical report produced by all, or at the least some, of these brokerages, one is very likely to be perplexed.

There is certainly no harm in reading the research reports about the companies. But what I'd personally insist is that the individual trader/investor make the decision rather than take the tip of an analyst. The moment one decide to step into equities asset class, the responsibility is firmly with the individual to look after the funds. You may make mistakes in choosing a wrong stock or entering at a wrong time, but at least you know that you have not fallen to the tip of some analyst.

The other point to consider while taking the research reports by their face value is how good they are for the (prevailing) market conditions. Are you reading these as an investor or a trader or a "day jobber"? The reports may be giving their price target for the next one or two financial years. If the analysts are providing tips for "short-term" trading, invariably they all mention the price target albeit the target date.

If one were to closely follow these analysts, one can find that they keep changing their price outlook and targets almost on a daily basis. If the analysts are horribly wrong, they may not be seen for days together. So why take their tips seriously.

Always remember that Markets behave the way they like. If the Markets were that predictable all the time, then everybody who got into the Equities asset class would have been mega millionaires. So read the research reports, listen to the analysts but make the decision yourself - it is your money.