Back To Basics In Trading Stocks
by Gregory J. Kuhn
Identifying the once or twice a year that the market is ready to embark on a very profitable move is the
ultimate quest of anyone trading stocks. But in this day and age of artificial intelligence, with neural
networks and fuzzy logic, using something as low-tech as the basic technical tools to find such
opportunities may seem, well, backward. Gaining insight into the market's future direction doesn't have
to be that complex.
While many investors in late spring and early summer 1994 were perplexed over inflation worries,
higher interest rates and a falling dollar, the market was telling us these concerns were overblown.
Indeed, it was telling us that a robust summer rally was about to unfold.
Here's how combining sentiment with some basic technical analysis, such as breadth and price/volume
analysis along with some common sense and strict adherence to a trading methodology, allowed me to
identify an important market bottom and then trade it successfully from the long side.