Remember high school physics and learning about Newton’s Law of Motion?
Mr. Richardson, my high school physics teacher, would be very proud of me for remembering after all these years, despite my seemingly unrelated career of providing investment advice in Bigfork, Montana.
Well, Newton’s First Law of Motion (sometimes called the Law of Inertia) states that an object at rest stays at rest and an object in motion stays in motion with the same speed and in the same direction unless acted upon by an unbalanced force.
It is my observation that the same principal generally applies to the motion and direction of investments whether they are stocks, bonds, gold, currencies, real estate and other market investment vehicles, it works the same way.
In the case of investments it is either the buyers or the sellers that act as the “unbalanced force”.
When there are more buyers than sellers, the “unbalanced force” creates an uptrend (motion) in the price of whatever the investment vehicle is.
When there are more sellers than buyers, the “unbalanced force” creates a downtrend (motion) in the price of whatever the investment vehicle is.
The previous two paragraphs describe yet another law: The Law of Supply and Demand.
Investors are in luck since we have an investment tool that specifically and accurately depicts the Law of Supply and Demand – they are called Point-and-Figure (PNF) Charts.
The unbiased PNF chart shows us when buyers are more prevalent than sellers – and vice versa – and also show us where there is support and resistance with any investment. As an investment coach, I recommend that PNF charts be continuously monitor with all of the investments in your portfolio.
There are several websites that teach investors about these amazing charts. My favorite is www.stockcharts.com where they have daily updated PNF charts as well as a wonderful course (free) to teach investors how to read and interpret PNF charts.
For more information, please contact my Bigfork office or visit my website: www.theinvestmentcompass.com
A place where physics and investment advice join forces.