FA vs TA

There are times where I review a company that I don’t know well to get a better feel for the business and how it is performing – the Fundamental Analysis (FA) effort.

This morning I was reviewing some horrible guidance information on RCL (Royal Caribbean Cruises) and so I figured a look at the chart was in order to see how investors were “reacting” to the news. I normally use the 5 minute chart when looking to trade a stock and this is what the action has been so far (I am long):

As you can see that the initial reaction does make sense as investors sold off on the news. However, the key things I noticed were:

1) The volume pattern

2) The divergence in Acc/Dist to the drop in price

3) The ability to hover and test the -0.6 level (the peak yesterday) and then the break above (the trigger for me).

One example where TA wins this bout – I had to trade what I saw and not so much what I thought at the time. The stock is currently trading near the high of day (hod) on good volume.

6 thoughts on “FA vs TA

  1. Hello Derald,

    This is a really interesting post for me, since I have never used the accumulation/distribution indicator before.

    When I enlarge the chart I can see the divergence you mention in your second point. Just to make sure that I’m getting this right, here goes my attempt. My understanding of that early divergence is that despite there is a sell-off on the news, there is also buyers coming in to absorb it at a lower price. Due to this the accumulation/distribution indicator jumps up.

    I think, I am a little lost on the last point. I don’t get the importance of the -0.6 level from the previous day. All I can figure out from this (and I may be wrong), is that the amount off accumulation equals the amount of distribution. This I guess, implies that despite there being a sell-off, there is also buyers present.

    I’m sure you have a lot of things on your hands. However, if and when, you get a chance, would you kindly be able to elaborate on that last point.

    Once again, and as always, thank you for this little piece of education.

    SM

  2. Thanks for the question. On the specific issue of that -0.6 level — think of it as a Pivot Point. If you follow the posts where I cover the use of Acc/Dist, I will often note this PP as being a key driver for entry/exit. The divergence is a really nice tell, but you need to know this PP level for timing.
    It is very consistent, mechanical, and a simple approach that keeps out a LOT of noise.

  3. Derald –

    Yes what a reversal! I took a scalp on this one today. A question for you. I am using the A/D on the TC2000 platform. The scaling or the way your platform is set-up is not quite the same on the A/D in TC2000. I wonder if it really matters. I use a 5d and 15d with the A/D on. So I would have potentially taken my entry around 27.47 as the 5d/15d crossed.

    Regards

    Noman

  4. I will visit your acc/dist post to make a little more sense of this. I’m mainly price action, so am very favorable to keeping everything simple and to a minimum. However, I can see the value in this indicator.

    Thanks again Derald.

    SM

  5. Additionally I could have also taken a position on the bounce of the PP at S3(Support 3).

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