A Fund-Company Chief Embraces Technical Analysis

MarketsMuse Editor Note: In the course of rifling through the onslaught of today’s mid-day trading desk talking points sent to us courtesy of top gun traders at major Wall Street firms, the theme has been ripe with “support levels” i.e. the most followed stocks and ETFs that are approaching, or “violating” short-term “technical support levels.” While our editorial staff has spent more time [in prior lives] analyzing point and figure charts than most of our readers would care to count, this week’s WSJ profile of Wasatch Funds’ Sam Stewart (courtesy of reporter Simon Constable) indicates that more than a few smart folk embrace the notion that charts merely tell traders what happened in the past..

“….If it wasn’t for the global financial crisis that began in 2007, Sam Stewart, president of the Wasatch Funds, might never have considered using so-called technical analysis to help pick stocks. But these days he wouldn’t consider doing otherwise.

In the fall of 2007, he saw value in stocks. The major indexes were starting to drift lower then, and some sectors, including financials, were already tanking. Some stocks looked cheap to him, based on fundamental analysis, so he bought them—and lost money as markets plunged in 2008 and into 2009.

In retrospect, Mr. Stewart says, “I lost sight of the forest for the trees.” If he had looked at the charts at the time, he’d have said to himself, “You are crazy” to consider buying, he now says.

For those who are bullish on stocks, Mr. Stewart has some good news. The same indicators he ignored at his peril back in 2007 “are giving me reasons for optimism today,” he wrote to shareholders.  The full story at WSJ