Stocks & Commodities V. 28:9 (56-59): Can Price Patterns Be Objective Tools? Recognia’s Kathryn St. John Tells You by J. Gopalakrishnan and B. Faber

Can Price Patterns Be Objective Tools? Recognia’s Kathryn St. John Tells You by J. Gopalakrishnan and B. Faber

For the past eight years, Kathryn St. John has been building products and tools to help self-directed investors understand, utilize, and leverage technical analysis and chart pattern recognition to make better investment decisions. Her appreciation of technical analysis has helped Recognia build actionable investment research products that offer dynamic and action-oriented trading ideas for all types of traders. St. John continues to lead product management initiatives for Recognia and has seen the products deployed around the globe in the world’s largest brokerage firms, banks, and institutions.

Technical Analysis of Stocks & Commodities Editor Jayanthi Gopalakrishnan and Staff Writer Bruce Faber interviewed Kathryn St. John via telephone on July 8, 2010.

Kathryn, how did you get interested in chart patterns, specifically?

It came about naturally. I have a computer science background, and I minored in business. I started working with Recognia long before the company had its first customer. We had this interesting technical analysis software, specifically a chart pattern recognition product. Since then, of course, we’ve ventured into other areas with more typical mathematical indicators and value analysis. But at the time we had this great chart pattern recognition technology. We developed it because the founder of the company was doing some trading on his own when he discovered chart patterns. He thought that there had to be a better way of using the technique than looking at a chart and trying to find these patterns one chart at a time.

I joined the company to help build our first user interface with the product. Originally, we were just going to sell the data, but then we realized that we needed to build a way for people to see the research that we were generating. Since I’ve been with Recognia, I’ve explored a number of different areas related to chart patterns and technical analysis. I’ve built up my own knowledge base and moved from looking at the analytics itself to how we can build products that will help people with their trading and bring technical analysis and chart patterns to a wider audience.

During your time at the company, have you noticed any difference in the attitudes of the public in terms of accepting technical analysis?

I certainly have. We like to think we have been a part of that, because our approach has been a bit different from some other technical analysis products. When I first started, I found that the retail, self-directed audience of investors and traders, unless you were really into technical analysis, used terms like “voodoo” and “looking at the stars” to describe technical analysis. They would question how looking for shapes on a chart would ever help them to trade.

Why do you think they were so against technical analysis?

A lot of that attitude came from not understanding that we look for those shapes because of what it tells us about the underlying behavior of the people trading those stocks. We are not looking for a triangle on a chart because it is this nice symmetrical shape, and it looks pretty. We look for it because it represents tightening trading action between the buyers and sellers, after which we finally see a breakout.