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Well, why not?

True:  Not many value investors are coming out of the closet about technical analysis.  Yet technical trading and value investing is not as controversial a union as you might think.

Consider this scenario.  Let’s say you crunch the numbers on your fave value candidate and it’s mispriced so far below book value you begin to salivate.  I mean, it’s got a margin of safety so wide you could land a jumbo jet on it.  So you put on a gargantuan position and…and prices  continue to drop.  And drop.  And drop some more.

To add insult to injury, you’ve been buying more stock as prices fall.   Problem is, they keep falling.  (See Losers Average Losers: The Folly of Averaging Down)

In desperation you scan your Intro to Value Investing seminar notes.  You can’t tell if your chicken-scratch says “buy and hold” or “buy and hope“, so you do both.  As prices continue to fall your investment adviser tells you, “Don’t worry, the market always comes back”  (later you learn this is the same bone head who says, “don’t worry, real estate always increases in value”).

Meanwhile CNBC announces Buffet is down another 20% and you wonder how many months will pass before you’re able to sleep again.

Sound familiar?  If you tried value investing in 2007-2008 you may feel a nervous twitch at the memory.

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Now,  if you’re the poor fellow in the above example, you’re looking at no sleep for up to several years. Yikes.

On the other hand, think about this:  If, by deploying a simple trend following indicator it keeps you from putting on a position while prices are in a free fall–what’s that worth to you for peace of mind? How much value do you place on not losing six months of sleep? And get this: what if the comparatively superior timing of your entry nets an additional 2 or 3% you would’ve otherwise missed? And what’s that additional 2 or 3% worth compounded over a 10-20 year holding period?

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Ahhhh. Now that usually gets the value investor’s attention.

So you see, just having an awareness of the most basic of technical analysis tools–even if if you jettison the remaining 99.8% of all technical analysis–could totally transform your value investing experience from possible catastrophe to an enjoyable experience.

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