I love charts. The other day, I was reading about a couple who have been married for 40 years and have only been apart for one week during all that time. That is the kind of relationship I want to have with my data feeds.
Apart from the odd holiday, I am proud to say that I have seldom been chartless for the past 20 years, from my first scary-looking stand-alone PC to the superfast web-based system I have now.
When I set up my home office last year, I lasted exactly 15 days before an emergency call was placed to get live feeds installed. You could say that avid chartists have a pretty low price sensitivity when it comes to having live data feeds.
Before the days of the slow PC, every week some bulky pink and white chartbooks were couriered from Durban (where the company that produced them was based) to Allan Gray in Cape Town, where I worked at the time. The parcels were opened with all the eagerness of a package from Kalahari.net.
Of course, these charts had to be updated throughout the week if you wanted to be truly with it. We used a special mapping pen to do this - and mistakes were not tolerated.
Now that all of you know just how old I am, let me get to the point: In essence, technical analysis refers to the study of charts and graphs of share prices in order to identify investment opportunities.
Fundamental analysis involves studying data, mainly a company's financial statements, and forecasting a company's earnings in order to identify investment opportunities.
Most investment professionals can be divided into two groups when it comes to technical analysis. There are those who openly scoff at the usefulness of charts and technical analysis (but who secretly keep a set of charts that they run "just in case").
At the other extreme, there are devoted technical analysts who merely use fundamentals in the disclaimer of their reports, usually stating that although the technical view may well disagree with the fundamental view, it's nothing to worry about. It is a little like the health warnings on medication: necessary for the drug company, but of limited use to the patient.
On balance, the devotees of technical analysis tend to change their mind a lot more often than the first group. This is something you should bear in mind when you want to follow their recommendations.
We do not need to debate the merits of either approach as they can work in isolation or in combination, if used sensibly. In the next few columns, I want to focus on the use of charts, regardless of your investment "denomination".
The beauty of share price charts is that they tell you what the market has thought of a share and what it thinks about it now. The only thing to do then is to decide whether or not you agree.
It is a very human form of analysis, as the movement in a share price is, to a large extent, made up of all the thought and emotion that goes into an investment decision. Basically, the market either likes or dislikes a share, or it is still making up its mind. Like or dislike is easy - the share is either going up or down.
What interests me is when the market is undecided - when a share price goes sideways for some time. I use the term "sideways" loosely, as it refers to a trendless movement, but the share price can still fluctuate 10 percent or so during that time.
These long periods of sideways movement are often accompanied by impatience and disillusionment, or simply lack of interest. Sometimes the share price just needed a breather after a strong move. A long sideways movement is usually followed by a significant move, either up or down.
I have mentioned the danger of selling a share just because the price is doing nothing. A good example is Sasol, which spent most of 2003 between R80 and R90. The first half of 2004 was equally unexciting, with the share hovering around R100.
The current price of above R180 is a nice reward for having had a little patience during that time. Wesco is another example of a share that seemed to remain in limbo. It was between R125 and R140 for most of 2004. Wesco has since moved beyond R230, again handsomely rewarding patient investors who used the sideways move to pick up stock.
The next time you see a sideways move, be more interested, not less.