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Brian Shannon, a veteran stock trader and author, joined Benzinga's PreMarket Prep Wednesday morning to share his thoughts on the current market, as well as offering tips for newer investors that are looking to get involved in the market. Shannon relies heavily on technical analysis, or reading stock charts, to understand when to enter and exit positions.
And while the vast majority of retail investors who attempt to day-trade lose money, Shannon offered expert advice on which indicators to use and how to gain knowledge in the markets without losing large amounts of money.
"My first book is ‘Technical Analysis Using Multiple Timeframes' and that really allows you to look at what you're looking at on the screen is recognizing that people say are you bullish or bearish, but it depends," Shannon said. "Some other stocks you'll look at them and the longer-term trend is down, but the last couple of days it's up. It's just a mess basically, there's no consistency of trend here."
Shannon points out that looking at charts on different time frames, whether looking at a weekly, daily, or even hourly chart, could tell completely different stories. Shannon urges newer investors to learn how to read charts from various time frames, allowing them to understand that short-term trends may not be the same as the stock's long-term trends.
And while some technical traders rely solely on charts, Shannon uses an approach that incorporates both the underlying fundamentals of a company and the charts for technical analysis. This means that Shannon may look at a company's revenue growth, or lack thereof, and use that information to help better understand the charts he is looking at.
"I have a short position on a stock called G-III, I looked at their revenues and earnings and they started to flatten out," Shannon said. "Why has this stock held up while Nike Inc (NYSE:NKE) has gotten smashed? So that longer-term chart looks like it has room to the downside, I'm short here for a small piece."
Read Also: Nike’s Struggles Highlight Adidas’ Market Gains In Q2: Report
Shannon explained that he does not prefer to short stocks. Still, because G-III Apparel Group's (NASDAQ:GIII) fundamentals appeared to be weakening, as well as a chart that indicated further moves to the downside, he was willing to take a small short position on the company. Shannon also uses various technical indicators, such as VWAP, to help guide entry and exit points.
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Image created with Midjourney and a Wikimedia photo.
