Stock Market Charts ( they are easier than you think)

Stock Market Charts(they are easier than you

think)

Michael Kahn, CMTFebruary 2014

Who am I?

Chartered Market Technician (CMT) trained and certified in market

analysis

Columnist – Barron's OnlineNewsletter Editor – Quick Takes ProFormer charting software designer

…and beaten up enough by the markets

What do I do?

Help investors assess risk and reward.

no crystal ballno tea leavesno chicken entrails

Agenda

Just the basicsWhen the market is moving - trendWhen the market is resting - pattern

Other important stuff – volume, sentiment, time

Possible Goals

Get the feel for the market (sentiment, momentum)

What does the market say? Bullish?Manic?

Does the chart agree with the fundamentals?

Or at least not disagree?Intangibles

The FedGurus“Risk on”

Possible Goals

What part of the market is best? (relatives)

Sizebig or small

SectorsDefensive or aggressive?Traditional leaders or not?

Bonds? Gold?Maybe it is time to diversify asset classes

Technical analysis is a windsock, not a crystal ball. - Carl Swenlin

People

People tend to do similar things when faced with similar situations.

People’s behavior is the basis for chart patterns.

The chart is the chart is the chart.

(no analyst guesses and gov’t revisions)

What is Fundamental Analysis?

A method of evaluating a security that entails attempting to measure its intrinsic value by examining related economic, financial and other qualitative and quantitative factors.

-- from the CFA Institute website(and Investopedia)

What is Technical Analysis?

A method of evaluating securities by analyzing statistics generated by market activity.

-- from the Market Technicians Association website

What do they have in common?

Neither one can handle conditions that cause the market to be restricted, manipulated and otherwise not free.

Fraud Mergers Quantitative Easing

Save us Obi Ben Bernanke(sorry Janet)

Dated humor

I will make you a chart you cannot refuse

The Godfather of Technical Analysis

How I cope

Price Rules!

Price - The stuff you put in the bank

In price, there is knowledge.

Alan Shaw, CMT, Chief Technical Analyst.

Smith Barney, retiredRalph Acampora, CMT, Chief Technical Analyst, Prudential

Securities, retired

Volume is next

Volume – How much money is moving

In volume, there is truth.

Dennis Jarrett, Jarrett Research

Momentum

Momentum – How fast it got there

Which speed is profitable and most sustainable?

Structure (Patterns)

Structure – Trends and Patterns

Sentiment (Fear and Greed)

Sentiment

I feel good! Whatever She’s gonna eat us!

Tesla Oct 2013 Electronic Arts Jul 2012

We got game!

Price Volume Momentum Structure Sentiment

Looks like a cheaper place to buy

How many times have you thought, “My stock is on sale, let’s buy!”

Looks like a cheaper place to buy

Same price, different trend……could the same be on tap for 2014?

The trend said it all

It works in both directions.

What does the market have to say?

The trend said it all

It works in long-term time frames at major turning points, too.

Does something look right here?

The Big Picture a few years ago.

And today…

Log scales

Leadership

Changing? Barron’s Online November

Leadership

Changing again?

Leadership

Leadership

It’s the end of the world as we know it. – R.E.M.

Sentiment

Sentiment

Are you the last to be invited to the party?

social media stocks last year? biotech now?

Is your hair stylist giving you tips?

Are they ridiculing the bearish commentators?

Gold is going to $800!!!!!! Or for early 2009, were doom

and gloom forever?

Quiz Time

Question - What does it mean when the neighborhood tavern has CNBC on the television and not ESPN?

Quiz Time

Question - What does it mean when the neighborhood tavern has CNBC on the television and not ESPN?

Answer - the market is not at a bottom

Quiz Time

Question - What does it mean when the banks are offering new interest only mortgages?

Quiz Time

Question - What does it mean when the banks are offering new interest only mortgages?

Answer – the real estate market is not at a bottom……(sound familiar?)

Quiz Time

Question - What does it mean when there are whole aisles in the supermarket dedicated to the Atkins diet?

Quiz Time

Question - What does it mean when there are whole aisles in the supermarket dedicated to the Atkins diet?

Answer – time to buy bread and cereal stocks

Question - What does it mean when everyone is talking about the Great Depression and Financial Armageddon?

Quiz Time

Quiz Time

Question - What does it mean when everyone is talking about the Great Depression and Financial Armageddon?

Answer – It’s March 2009!

The AAII survey showed 70.27% bears on March 5. Unprecedented. And it was not the only one.

Quiz Time

Question – What does it mean when, after a five-year bull market, mutual fund company advertisements show regular people saying “we’ve got to get back into the market?”

Quiz Time

Question – What does it mean when, after a five-year bull market, mutual fund company advertisements show regular people saying “we’ve got to get back into the market?

Somebody is about to get burned again.

Up is good, down is bad.

Nice long-term base

What do you see?

How about this?

or this?

There was no need to lose it all.

There was no need to lose it all.

real trading!

If you don’t see anything, it’s not there.

If you don’t see anything, it’s not there.

Get it?

Up is good, down is bad.

Up is good, down is bad.

Up is good, down is bad.

The Real World Right Now

The Real World Right Now

Double top, bear reversal

Up is good,

Down is Bad

The real reason we do this:

To make the buy, sell or hold decision.

Not to predict the future

The Big Question

Does market analysis work anymore?

Yes! (mostly)

The Real World Right Now

Profitable Trading. Written up on the breakout. Failed this week

The Real World Right Now

Does Mikey like it?

The Real World Right Now

Does Mikey like it?

The Real World Right Now

Does Mikey like it?

The Real World Right Now

Does Mikey like it?

The Real World Right Now

The Real World Right Now

Mmmm, dividends

The Real World Right Now

End with some laughs

An ode to Quantitative Easing

Ben Lightyear.

QE to infinity and beyond!

Have another shot of Bernanke juice.

Ben Bernanke as a child

Quick Takes Prowww.QuickTakesPro.com

Getting Technical www.Barrons.comTwitter @mnkahn

Books:Beginner’s Guide to Charting Financial

Markets Copies available right

hereTechnical Analysis: Plain and Simple – 3nd

editionReal World Technical Analysis

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Twitter @mnkahn