Why Do Brokers and Stock Analysts Differ in Their Analysis?

Stock Market Investment and Trade Strategies - JayceeDeGuzman.com

In the Stock Signals Philippines, we have a Private Clients Forum. That’s where I and my team discuss the nitty-gritty of the stock market.

We maintain a “learning culture” and not just an “asking culture” in the forum.

If they will ask “What’s the sum of one and one?”, I will show two pictures of apples and throw the question back to them by asking, “How many apples do you see now?”

The learning culture has to be that way. Otherwise, everyone will just ask, “What can you say about this and that?” without doing an initial research. My members will not learn if I will only throw straight-cut ready-to-eat answers.

The Question

Here’s one of the questions raised by one of my clients.

Good pm, Jaycee. I have both COL and First Metro account and would like to seek your help on how to interpret their technical analysis (TA) data.

COL TA usually presents their analysis with:

1) trend line — sideways, down or up
2) support (color back)
3) resistance (color red) — how come they don’t have both support and resistance for each stock, mostly it’s just either support, or its resistance alone?

First Metro platform offers this info:

1) MACD – 5 -20 -50 -100- 200 period; bullish, bearish, trending (what is trending?) how should I interpret data here?
2) RSI – 5 – 20 -50-100 -200 period; overbought, oversold, neutral, range (how do I interpret data here?)
3) overall indicators – mid term, short term, long – term, and corresponding support and resistance; how should I put together or blend all data here if I want market timing?

My comment with COL is that they don’t regularly update their TA and they don’t have both support and resistance for each of the stock. While, with First Metro, they don’t have sufficient explanation to their technical analysis data.

How do I analyze both data from COL and First Metro to make intelligent conclusions on price movement, trend line, market timing, buy below price, etc.?

How come different indicators send different signals? How come different brokers also have different opinions, sometimes they coincide, but sometimes, they are completely opposite?

Thanks in advance.

With the level of confusion I sensed from the questions, I realized a general piece of advice is more appropriate at this moment.

Do you still remember that moment in college when you didn’t understand something in the class of Prof. Terror and you raised your hand to ask?

Your professor gladly responded with a by-the-book definition of term but you still nodded your head as if you really understood it completely. Do you remember that?

That’s what I want to avoid in the Private Clients Forum. If and when I sense the need to help a client, I got to handle and direct the conversation towards that direction.

My Answer

Stock trading is not an exact science. That explains why my sentences are often conditional statements (if, when, should, just in case). Therefore, brokers don’t have a uniformed conclusion on their analysis. It’s the same thing with analysts. One guy recommends a BUY, while one guy recommends a SELL or HOLD. One guy has X as the major support, while the other guy has Y as the major support. Different folks, different strokes.

Also, the signals issued by technical indicators are not etched in the stone. What do I mean? If MACD issued a BUY signal, it doesn’t mean you should buy right away. You need to check for confirmations. How to check for confirmations? It’s through the other technical indicators, volume, or foreign investors’ transactions.

I know it’s too big to imagine when you’re just a beginner. It boils down to practice and experience. Technical analysis books can only describe what an indicator represents, with a few examples, perhaps. But for the lesson and significance (more than just knowing the definition of terms) to sync in, nothing can replace real-world practice. That’s the only way for you to get a first-hand experience on how to mix and match the indicators and understand the relevance and connection of each with one another.

When I was starting up, I was able to describe what each indicator means. But did I already know how to mix and match the indicators at the onset (after memorizing their definition)? Of course, I didn’t. I had to practice.

As far as why a particular broker has this and the other broker doesn’t have that, I can’t comment on that because I don’t represent any broker.

So what do I recommend? FOCUS. Finish One Course Until Successful.

More than words, I suggest you explore one indicator at a time. Don’t put everything on one plate and make a salad of everything where you will find yourself having a hard time eating.

Start with the SUPPORT and RESISTANCE. Read the articles on my website. I am confident to say that you’ll come out better off than the first time you visited my website after reading the thousands of articles that I’ve already written.

What did you learn today? Let me know in the comments.

Jaycee De Guzman

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