"The charts for Plutonic Power Corp. (PCC-T2.320.125.45%) will give us a better idea of trend, support, and resistance in searching for opportunity. ... The three-year chart is not what I would call particularly attractive. PCC was range bound with support at $3.00 and resistance at $4.00 over the period May 2009 to May of 2010. After May of this year the stock broke below support at $3.00 and then held on to $2.40 but quickly found new lows at $1.50. PCC has caught a bounce from the rock bottom at $1.50 and is coming out of an oversold situation. ... The six-month chart illustrates the weakness in the stock and the inability to break the downtrend. There was an eight-day rise that took the stock higher in August of 2010, but it was short-lived.
The RSI signalled that the stock was oversold in October which attracted some buying. The MACD appears to be turning higher but notice the resistance at $2.20.
PCC has given bottom fishers lots of head fakes, baiting them into the market only to shred their capital. At this point, the stock is still fighting the downtrend and if you are thinking of stepping into this name, don’t be surprised if you get a shock."
This is what is referred to amongst stock market astrologists as 'Technical Analysis'.
As Wikipedia notes,
"Whether technical analysis actually works is a matter of controversy. Methods vary greatly, and different technical analysts can sometimes make contradictory predictions from the same data. Many investors claim that they experience positive returns, but academic appraisals often find that it has little predictive power."
The 'idea' of technical analysis is that there are patterns in stock market charts that will help you predict what will happen next. In my opinion, it's all about as plausible as the notion that an Octopus could predict the outcomes of World Cup games. But whereas Paul the Octopus was treated as a novelty, technical analysis is taken seriously by enough people that we get columns in our most serious national newspaper, talking earnestly about MACD's and RSI's.
I love the last line in the article, "Make it a massive weekend and Happy Capitalism!" If only Max Weber was still around today to hear people talking about technical analysis, the modern version of the mysticism and witchcraft of the middle ages that was supplanted by the rational capitalistic age, and referring to it, with no sense of irony, as capitalism!