Alphabet entered a correction in May. Katie Stockton, founder of Fairlead Strategies, says it's breaking out now. She draws lines for a living. The lines told her this.
Technical analysis is astrology for people who wear Patagonia vests. You take a chart. You add some lines. You squint until you see a pattern. Then you call CNBC and tell them the pattern means something. Stockton found her pattern. Alphabet is breaking out. The stock goes up or it doesn't. Either way she drew the lines correctly.
Retail traders will see this headline and think they've discovered alpha. They'll buy Alphabet at the breakout. The breakout will fail or it won't. If it works, Stockton gets credit. If it fails, she'll draw new lines and find a different pattern. The lines are never wrong. The market just didn't respect them this time.
Corrections are a technical analyst's favorite word because they sound scientific. The stock dropped. That's it. That's the whole story. But if you call it a correction, you can charge people money to tell them when the correction ends. Stockton sees the correction ending. She saw it in the lines. The lines don't lie except when they do.
Alphabet makes $80 billion a quarter. The stock moved down for four months. Now it's moving up. Stockton says this matters. She's built an entire career on saying things like this matter. The lines confirm it matters. The breakout is real. The breakout is happening. Quick, someone buy before the lines change their mind.
Somewhere a day trader is setting a stop loss based on Fibonacci retracements and wondering why his account balance keeps correcting toward zero.
Photo by Adarsh Chauhan on Unsplash
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