Even today, technical analysis still gets a bad rap as being, at best, a self-fulfilling prophecy and, at worst, financial voodoo.
And while its practitioners are usually not good ambassadors for the discipline, that does not take away from its usefulness.
It is true that technical analysis — the study of data generated from the market through trading activity and sentiment — is most often associated with day traders and, unfortunately, get-rich-quick marketing. However, it is perfectly suited for use by traders who hold positions for a few days to a few weeks. And, more importantly, it is useful for investors interested in long-term commitments of several years or more.
For those who say they never met a successful technician, let me introduce Robert B. Peirce, a semi-retired portfolio manager with nearly a half century of success. When Bob sold his stake in his investment firm, the Pittsburgh-based Cookson, Peirce & Co., he had almost a half-billion dollars of assets under management and all of it was under the care of long-term technical analysis.
In fact, his methods for employing technical analysis to portfolio management earned him the 2010 award given by the Market Technicians Association. According to the awards committee, the biggest reason for the honor was his “long track record of running technical-analysis-driven portfolios.”
Peirce took his place next to such charting authorities as John Bollinger, Martin Zweig and Charles H. Dow.