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Off to the Races



Editors note: With this column, we introduce Kevin Depew, a technical analyst with Dorsey, Wright & Associates where he covers the equity and futures markets. Kevin welcomes your feedback and comments at

I haven't always held the title of Technical Analyst, but intuitively I think I have always been a technical analyst.

I graduated from college in 1991 with a degree in philosophy. If you remember there was a recession at the time, and consequently demand for philosophers was less than usual. "Usual" demand for philosophers is grim even during good times. So, I did what any unemployable philosophy graduate from Kentucky would do, I squandered my talents and money at the racetrack.

OK, squandered may not be entirely true. By 1993 I was employed as a handicapper for the Daily Racing Form, a very stressful job since I woke up every day wondering how in the world it was possible that someone was actually paying me to read a racing form. Could such good fortune possibly last?

One day I found myself standing in the paddock at Keeneland in Lexington, Kentucky, staring at groupings of numbers corresponding to horses in the third race. I was trying to discern a pattern in the numbers. What I was staring at were sheets of paper with numbers on them produced by Len Ragozin's New York-based firm, "The Sheets." It was my belief that those numbers, refined speed figures, displayed patterns that would allow me to predict the probable outcome of a race. Accurately identifying overbet horses who were likely to run an off race, and underbet horses who were likely to run a good race, was, I felt, the key to making money on horseracing.

I didn't quite realize it at the time but this was my first introduction to technical analysis; using pattern recognition to bet on horses.

In the mid-1990s my attention, like much of America's, turned to the stock market. But it wasn't good enough for me to invest in the market -- I wanted in on the action.

After spending quite a bit of time trying to develop some sort of discipline for selecting stocks and managing risk, I found I simply wasn't smart enough to be able to make sense of fundamentals and how they related to price movement.

Why is it that "fundamentally sound" stocks sometimes go down while "fundamentally unsound" stocks sometimes go up? I was used to thinking in terms of patterns, and for the life of me I just couldn't find any. Then one day I heard Jeff Weiss, then the chief technical analysts for PaineWebber, talking about the patterns of stock price movement. He mentioned that if anyone wanted to learn more about why stocks move they way they do, they should pick up a book called "Technical Analysis of Stock Trends," by Robert Edwards and John Magee. I did and it changed the course of my career.

If Edwards and Magee changed the course of my career, it was Dorsey, Wright & Associates that brought focus to it. The point and figure methodology taught by Dorsey, Wright helped me streamline the process and develop the logical, disciplined approach to the stock market I had been searching for. In time I found that the only thing I loved more than horseracing and the stock market, was learning about and teaching technical analysis. When Tom Dorsey offered me the chance nearly five years ago to join Dorsey, Wright I jumped at the opportunity. And still, I wake up every day wondering how in the world it's possible that someone pays me to do what I do.

When Toddo asked me to contribute to Minyanville I knew it would be an awesome fit. I've followed his writing for several years and the thing that most impresses me is that he always finds a way to lend perspective to what is truly valuable in life. It's easy to get caught up in the flicks and flickers of the tape and lose ourselves in the process.

As we take this journey together I look forward to meeting my fellow Minyans, sharing some of the things I know about technical analysis and learning from all of you in the process. It should be an exciting journey.

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No positions in stocks mentioned.

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