BY EVAN FRISCIA AND PARTH THAKKAR Introduction to Technical Analysis.

BY EVAN FRISCIA AND PARTH THAKKAR

Introduction to Technical Analysis

What is Technical Analysis

Technical analysis is a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume.

Technical Analysts look at the CHARTS to make a prediction about the FUTURE!

Tenets of Technical Analysis

Market Action Discounts Everything

Prices Move in Trends

Trends (History) tend to Repeat themselves

Lengths of Trends

Long term 9 months or longer

Intermediary 3 months to a 9 months, but

no longer than a year

Short term Days to weeks, but no longer

than 3 months

Chart Types

Bar Chart

Line Chart

Japanese Candle Chart

Bar Chart

Line Chart

Candlestick Chart

Candlestick Chart

Directions a Trend can take

Up Trend

Down Trend

Horizontal Trend/Sideways or No Trend

Uptrend

A series of higher peaks and higher troughs on a price chart.

Down Trend

A series of lower peaks and lower troughs on the price chart

Horizontal Trend/Sideways or No Trend

A series of relatively similar peaks and troughs.

Support

Support is an imaginary price level that is difficult for a stock to move below because there are so many investors willing to buy at that level. It may be a horizontal or diagonal price level.

Support

Resistance

Resistance is the opposite of support. It is an imaginary price level that is difficult for a stock to penetrate on the upside. It may be either a horizontal or diagonal price level. Resistance is created when the bears gain enough momentum to overwhelm the bulls and stop or reverse upward movement.

Resistance

Channels

How do we Conduct Technical Analysis?

Studies!A Technical Study is a function derived from

the stock price, or an underlying factor that determines the stock price.

When graphed, these functions allow give us the information needed to form a Bullish or Bearish opinion towards a

stock!

More on Technical Studies

OverlaysIndicators

Oscillators

Overlays

Simple & Exponential

Moving Averages

Linear Regression

Curve & Trendline

Bollinger Bands

Fibonacci Retracemen

ts

Simple Moving Averages

The average stock price over a certain period of time.

Exponential Moving Averages

A type of moving average that is similar to a simple moving average, except that more

weight is given to the latest data.This type of moving average reacts faster to recent price changes than a simple moving

average.

Linear Regressions

Bollinger Bands

Fibonacci Retracements

Indicators

Moving Average Convergence Divergence (MACD)

Relative Strength (RSI)

MACD

An indicator frequently used in technical analysis showing the average value of a security's price over a set period. Moving averages are generally used to measure momentum and define areas of possible support and resistance.

MACD Application

Observe the Crossovers

MACD Application

Observe the Crossovers

MACD Application

Observe the Crossovers

Relative Strength Indicator

A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula:

RSI = 100 - 100/(1 + RS*)

*Where RS = Average of x days' up closes / Average of x days' down closes

Relative Strength Indicator Application

Observe when the RS crosses above the 70 line and below the 30 line

Relative Strength Indicator Application

Observe when the RS crosses above the 70 line and below the 30 line

Relative Strength Indicator Application

Observe when the RS crosses above the 70 line and below the 30 line

Oscillators

Stochastic Oscillator

Projection Oscillator

Stochastic Oscillator

A technical momentum indicator that compares a security's closing price to its price range over a given time period

The theory behind this indicator is that in an upward-trending market, prices tend to close near their high, and during a downward-trending market, prices tend to close near their low.

Stochastic Oscillator Application

Observe when the stochastic lines cross the bounding lines (just like RSI)

Stochastic Oscillator Application

Observe when the stochastic lines cross the bounding lines (just like RSI)

Stochastic Oscillator Application

Observe when the stochastic lines cross the bounding lines (just like RSI)

Projection Oscillator

The Projection Oscillator study shows the relationship between the current price and its minimum and maximum prices over time. Unlike the Stochastic Oscillator, here the minimum and maximum prices are adjusted up or down by the slope of the price's regression line.

Projection Oscillator

Questions