Power Of Multiple Indicators

It is vitally important to seek a second opinion, especially if you are facing serious health problems such as cancer. Two doctors can give you the same diagnosis, but they may suggest different treatments. The significance of getting more than one opinion is not limited to only health issues. As you know, a simple brake repair could cost anywhere between $70 to $300 depends on different repair shops. A lesson here is that it is always wise to get multiple opinions before you make decisions. And another thing is: if everyone agrees, the information probably is accurate. 

The same principle applies to stocks. You don't want to trade stocks based on only one signal or information, no matter how valid it may look. What you must have is multiple confirmations before committing yourself. Let me show you an example.

Talbots Inc (TLB) indicated at least three sell signals after closing yesterday (5/2/01). As you can see on its daily chart, TLB failed to break out above its 50-day moving average. If you observe the shape of the bar, it has an upper tail. This bearish shape is known as a shooting star among candlestick chartists. Also, the stock failed to take out its 50% retracement level of the February high to the April low.

TLB closed today (Thursday) at 41.36, down 1.00. Remember, multiple signals are always better than one.

Till Friday,

Eddie