Also, you should critically evaluate the work of technical analysts, including their reasons for buying or selling a stock. Did the analyst correctly identify an up or downtrend? Was their support or resistance level right? What about their stop or did they hold on too long? This will allow you to assess their strengths and weakness and act accordingly.
This research should not only cover the specific investment but also the analyst recommending it. In the past, has the analyst adjusted his recommendations throughout the year? Also find out how his past lists have performed and what kind of drawdown his recommendations may have had during the year.
Also assess the analyst’s longer-term view of the economy or stock market. If the analyst is looking for a major market decline during the coming year, why would you want to buy and hold a stock they are recommending?
Therefore in 2013, become your own analyst and do your own research. Find a methodology that makes sense to you and then track it for awhile.
Of course, the major Wall Street analysts also have their own lists of most and least favored stocks as I discussed recently Wall Street's Pick and Pans. I wanted to conclude this article with a review of Schlumberger Ltd. (SLB) and an explanation of why I do not currently find it attractive.
The weekly chart of (SLB) shows a broad trading range, lines b and c, which has been in effect for most of 2012. There is strong resistance at $78.47 to $80.78, the highs in 2012. The long-term downtrend from the highs in 2007-2008 is now at $92.
(SLB) rallied the first week of 2013 to close back above its 20-week EMA and its quarterly pivot at $71.32. This is a positive sign. It has near-term support at $66.85 with more important (line c) at $61.73.
The relative performance still shows a pattern of lower highs (line d) and lower lows, line e. The RS line needs to break through its downtrend and above the high from the fall of 2012 to suggest it is starting to become a market leading stock.
The on-balance volume (OBV) is currently below its weekly WMA and well below the resistance at line f. A move through this resistance is needed to suggest that it has begun a sustainable new uptrend.
If you find the relative performance and OBV analysis worthwhile, you might want to track (SLB) on your own and let me know if you see a change in its trend.
Remember for 2013, follow these five rules and I think your performance will improve.