Studying for and taking the CMT exams provided another turning point in my career, and allowed for an enhancement of an existing technical process. Earning the CMT designation has allowed me to develop technical analysis techniques that are easy to understand, that are objective and rules-based, and that work well with fundamental analysis.
VB: I’m Vernon Bice, a Portfolio Manager and Technical Analyst for Lord Abbett’s Innovation Growth team. I’ve been in the finance industry for 19 years and received my CMT designation in 2016.
CMT: Could you describe how you use technical analysis in your role?
VB: Our team uses technical analysis in combination with fundamental analysis, specifically using technical analysis to find positive price momentum. When evaluating investments, we look for three characteristics: A superior and disruptive business, positive operating momentum, and positive price momentum.
For the second characteristic, positive operating momentum, we rely on fundamental analysis. For the final characteristic, positive price momentum, we use technical analysis. Specifically, we use trend-following and relative strength to determine whether a stock has positive price momentum.
CMT: How does this lend an “edge” to your strategy?
VB: In my mind, there are two main branches of technical analysis: one is mean-reversion, and the other is trend-following. Mean-reversion is used for shorter-term trading, whereas trend-following is more suited to an intermediate time frame that we use.
One of the most important parts of my work is to identify changes in trend which can be very difficult to discover. We use four trend categories to help us not only identify the trend, but a potential change in trend. We call those four categories uptrends, pullbacks, downtrends, and snapbacks.
Simply put, we want to own more stocks that are in uptrends than are in downtrends.
CMT: What was your first exposure to technical analysis/charts?
VB: I was first exposed to charts in high school, through my stepfather, John Kounse. John read the newspaper Investor’s Business Daily religiously and invested in stocks as his hobby, so I became interested in stocks and began to read IBD, too.
I vividly remember taking a trip to Cincinnati from my hometown in West Virginia and John quizzing me on the ticker symbols of companies. We also made a few stops at retail chains that were publicly traded so that John could check out how the businesses were doing. We would then discuss what made a company successful and what that meant for the stock. This ignited my passion for investing in the markets.
CMT: How did you first become involved with the CMT Association?
VB: I had known past president, Craig Johnson, for many years and always respected the quality and rigor of his work as well as many others associated with the CMT organization. I didn’t take the CMT exams until later in my career and I’m not sure why it took me so long, but Craig gave me the insight and confidence to do so.
CMT: Is there a CMT Association event or publication that you especially enjoy?
VB: The annual CMT Symposium is a lot of fun! It is a very humbling and exciting experience to get to interact with the legends of our field.
I remember last year when I was asked to speak at the annual symposium being extremely nervous when standing in front of legends like Louise Yamada. But everyone was so encouraging and gracious, which really boosted my confidence. I will be forever grateful to members, such as Craig and Louise, as well as the CMT Association for that opportunity.
CMT: Can you describe your experience in the CMT Program?
VB: Studying for and taking the CMT exams provided another turning point in my career and allowed for an enhancement of an existing technical process.
The program provides a different experience for each person. In addition to learning the full scope of technical analysis, it made me step back and examine the details of my own process which I had formulated over the previous 20 years. For example, the curriculum references David Aronson’s book, Evidence-Based Technical Analysis. I read the book and it inspired me to back test our process including the four stages of absolute momentum that I mentioned earlier. This provided empirical data to not only validate our process, but to also give us the confidence to apply it more consistently.
The program equips candidates with the tools that they need to develop their own techniques and methods in a way that is evidence-based and encourages them to understand and articulate why a technique would or would not work.
Additionally, getting the CMT designation demonstrates that the applicant takes technical analysis seriously and has committed to learning about the many different aspects of their craft.
CMT: How has earning the CMT designation impacted you professionally?
VB: The idea that you should combine fundamental and technical analysis with other investment tools was a game changer for me. I think it is important to use the most significant tools at your disposal from all sections of the investment toolbox.
Earning the CMT designation has allowed me to develop technical analysis techniques that are easy to understand, that are objective and rules-based, and that work well with fundamental analysis. The technical analysis aspect helps us to better understand market signals, which we make sure aligns with the fundamentals of a company when we own a position. Some investors believe that investment styles are mutually exclusive and that if you use technical analysis then you must disregard fundamentals, but that is against what the CMT curriculum teaches. I’m very fortunate that I get to work on a team, led by Tom O’Halloran, at Lord Abbett, that embraces the collaboration between technicals and fundamentals.
CMT: Do you or your team members use the CMT designation in conjunction with other designations?
VB: Many on our team have their CFA charter, and have studied their fundamental craft for decades. We all embrace our different perspectives and have respect for what each person brings to the table.
Our newest team member, Eugene Feldman, just passed the Level 3 CMT exam, and has his CFA charter. We believe he represents the future of our field where investors will start to embrace all tools including the ones that were once disregarded.
CMT: Finally, what is the greatest lesson or lasting advice that you have received in your career to date?
VB: It’s a simple concept, but crucial to successful investing. Cut your losers quickly, and let your winners run. Investing often goes against our human nature which makes having a process to keep our emotions and ego in check so important. While there are many ways to design a process that helps you with this task, I have yet to find a way without including the use of technical analysis into your investment process.
I can’t think of a better way to start the incredible journey of developing a technical process than getting involved with the CMT Association.