CHARTING METHODS Technical Analysis 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Technical Analysis? Huh? Don’t get intimidated when hear “technical analysis” Comes down to your supply and demand How is this different from fundamental analysis? Tries to make sense of market emotions by studying the market actions 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Chart Basics Technical Analysis: Introduction to Stock Charts 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Basic Terms Volatility Fluctuations 52-week high / low Price / trading range Open / closing price 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Charts Maps price performance Sheds light on supply and demand “investment roadmap” Price / volume relationship important 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Chart Types - Line Charts Most basic of all charts Just a line that connects the closing prices over a time frame No trading range Need examples 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Chart Types – Bar Chart Vertical line represents highs/lows of the day Horizontal line represents closing price Red = down Blue/Black = up Daily High Closing Price Daily Low Price Gap 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Chart Types – Candlestick Charts Vertical line represents the trading range Wide bar represents open and close White bar – Up and closes above opening price Red Bar – down Black bar – up, but closes below the opening price 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Chart Basics – Time Scale Dates along bottom of chart (varies from seconds to decades) Common Types: intraday, daily, weekly, monthly Subtle differences between different time scales 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Chart Basics – Time Scale You can see that there are subtle differences between the charts. In the daily chart, you tend to see more fluctuations from day to day. When you graph on a weekly basis, you smooth out the fluctuations somewhat, and in many cases, you case more easily identify a trend. Some investors tend to use weekly graphs more because it gives them a better overall picture of what’s going on in terms of trends. Daily Chart Weekly Chart 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Volume Amount of shares that trade hands between seller and buyers Price movements more significant when volume is above average We’ll talk about bases (cup with handle, flat bases, breakouts, double bottoms later). Maybe in the next lecture we can do that along with the market tops/bottoms. I thought this lecture would just be a good primer for tech analysis. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Price and Volume Average Volume 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Trends are your Friends Trend: general direction of stock Uptrend: higher highs, higher lows You can see here on the chart the trend is a definite uptrend. The black arrows show that the lows for each period are higher than the previous lows. The red arrows show that the highs for each period of time are higher than the previous period. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Sometimes, trends difficult to see As you can see, it is difficult to determine the trend here with so much fluctuation and volatility. There are times when the near-term trend of a stock is too difficult to determine. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Trendlines Simply put, a line drawn on a chart to represent the overall trend Upward trendline, connecting the lows, represents support 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Channels Two parallel trend lines that act as areas of support and resistance (more later) Any break through the channel is a break of the trend, otherwise the price should stay in range 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Support / Resistance Technical Analysis: Introduction to Stock Charts By Johns Wu & thebulltrader.com Support / Resistance 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Chart Analysis : Support Price at which BUYERS > SELLERS consistently. Buyers who missed out on the first dip will be pressured to buy if price continues to respect the support. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

AMZN Example of Supports AMZN retraces from a monstrous rally to $60 AMZN stops tanking at $60. NOT A COINCIDENCE. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

GOOG Support Psychology $510. MANNNN, I should have bought GOOG $$$$$!! OK. I’m not gonna miss out again. BUY @ $452 GOOG skyrockets from AWESOME earnings, but should I buy it???? CAUTION: Supports can breakdown. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

You should have sold here, at the BREAK DOWN. Support Breakdowns SELL if support “breaks down”, because it signifies that BUYERS no longer overpower SELLERS. Breakdowns are a BEARISH SELL signal. You should have sold here, at the BREAK DOWN. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Chart Analysis : Resistance Price at which SELLERS overwhelm BUYERS consistently. When a stock makes a new high and then retraces, sellers who missed out @ the previous peak will feel pressured to sell when price climbs back to that level. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

TM – Resistance Psychology Finally! $138. I better sell this time. TM – Resistance Psychology Should I sell?? Na, I’ll take my chances. I should have sold when TM was $138!! 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Resistance Breakouts When price “breaks out” above resistance, it becomes a new support level. *** IMPORTANT *** Breakout signifies clear dominance of BUYERS. (good time to buy) This is a BULLISH BUY signal. My favorite trade setup. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

TGT Resistance Breakout RESISTANCE BECOMES SUPPORT 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

SHLD Breakout Trade 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Moving Averages Technical Analysis: Introduction to Stock Charts 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Moving Averages (DMA or WMA) Most popular are 50-day and 200-day Shows the average price of the last # days and plots it on a line Often acts as areas of support and/or resistance Variations of moving averages is the 10-week and the 40-week moving averages. The 10-week is the same time-span as the 50-day. 10-weeks are found on weekly charts and can show slightly different points and calculations than the 50-day. In this chart, you can see the moving average acts a type of resistance and clearly shows a downward trend. The stock fails to break above its 50-day moving average. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

WIRE – Support @ 10 WMA 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

WIRE – Support @ 10 WMA Black line is the 40-week moving average and the red line is the 10-week moving average. In this chart, we see that the stock essentially bounces up every time the stock gets near or on the 10-week moving average. These are areas of support as buyers purchase shares here. This type of action also helps investors to recognize the trend of the stock. In this case, the stock is in an uptrend. 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

CPA – Support at 20 & 50 DMA 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

20 DMA and 50 DMA becomes points of support for this stock CPA – Support at 20 & 50 DMA 20 DMA and 50 DMA becomes points of support for this stock 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

So… Charts are fundamental to technical analysis Important to understand what is shown on a chart and the information it conveys Chart patterns and bases to come… 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Technical Analysis: Introduction to Stock Charts Tools for stock charts 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Charting on StockCharts.com Getting comprehensive stock charts Type in the company symbol Once you’re at the stock page, click on annotate to draw your own trendlines. From there, you will get lots of tools for analyzing stock charts 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

StockCharts.com 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Annotating in StockCharts 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Using Charts on Investors.com Log in using your username and password (you all have one as of now) Enter a symbol for the stock and then click on IBD Charts just below it There are links throughout the website that link to IBD charts Right clicking on the chart will give you important data for that day or week 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Relative Strength Line Relative Strength line measures the price performance of the stock to the price movements of the S&P500. The line is calculated by dividing the price of the stock by value of the S&P 500 index on that day. The RS Rating is an Investor’s Business Daily rating compares the price performance of the stock to all other stocks in the past 12 months. A 98 rating means that the stock has outperformed 98 percent of all stocks. Volume Moving averages 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit

Homework / Reading “Technical Analysis: Introduction” Investopedia Tutorial Link is on the download page of the website 7/29/2018 Dr.P.S DoMS, SAPM, IV Unit