Stock "Log" Analysis?

Analysing a stock chart is equivalent to analysing a well log. In fact if you rotate a stock chart by 90 degrees, you will get something very similar to a well log.

Well logs are very often the closest information we can get about a reservoir thousands of feet downhole. Similarly the stock charts, i.e., its price and volume data along with the other charts derived from these data, are very often the most direct information about what's happening to the stock, from while we can then make extrapolation on what's likely to happen to the stock price in the near future.

The recent chart of SINA, above, is a very good example of showing the value of reading charts. The time period that I call "T2" is the most interesting. The candle-sticks, its relative strength chart and the CMF chart all leads to the conclusion that, for some reasons, SINA is under accumulation in spite of the weak earning guidance for the next quarter. It could have been due to its red-hot, though free, blog service it just released. A week later after the breakout ("T3"), it was reported that another Chinese internet company, Tom Group of Li Kaching, is to acquire Shanda's 20% stake in SINA. No wonder!

In log analysis, we identify where the oil or gas is. In stock chart analysis, we identify where the money is flowing to or out of. Both are technical analysis and, when used correctly, adds value to an investment portfolio.