1. CHARTING METHODS Technical Analysis
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2. 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
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3. Chart Basics Technical Analysis: Introduction to Stock Charts
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4. Basic Terms Volatility Fluctuations 52-week high / low
Price / trading range
Open / closing price
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5. Charts Maps price performance Sheds light on supply and demand
“investment roadmap”
Price / volume relationship important
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6. 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
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7. 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
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8. 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
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9. 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
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10. 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
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11. 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.
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12. Price and Volume
Average Volume
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13. 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.
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14. 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.
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15. Trendlines
Simply put, a line drawn on a chart to represent the overall trend
Upward trendline, connecting the lows, represents support
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16. 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
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17. Support / Resistance Technical Analysis: Introduction to Stock Charts
By Johns Wu & thebulltrader.com
Support / Resistance
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18. 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.
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19. AMZN Example of Supports
AMZN retraces from a monstrous rally to $60
AMZN stops tanking at $60. NOT A COINCIDENCE.
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20. GOOG Support Psychology
$510. MANNNN, I should have bought GOOG
$$$$$!!
OK. I’m not gonna miss out again. $452
GOOG skyrockets from AWESOME earnings, but should I buy it????
CAUTION: Supports can breakdown.
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21. 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.
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22. Chart Analysis : Resistance
Price at which SELLERS overwhelm BUYERS consistently.
When a stock makes a new high and then retraces, sellers who missed the previous peak will feel pressured to sell when price climbs back to that level.
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23. 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!!
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24. 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.
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25. TGT Resistance Breakout
RESISTANCE BECOMES SUPPORT
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26. SHLD Breakout Trade
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27. Moving Averages Technical Analysis: Introduction to Stock Charts
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28. 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.
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29. WIRE – 10 WMA
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30. WIRE – 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.
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31. CPA – Support at 20 & 50 DMA
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32. 20 DMA and 50 DMA becomes points of support for this stock
CPA – Support at 20 & DMA
20 DMA and 50 DMA becomes points of support for this stock
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33. 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…
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34. Technical Analysis: Introduction to Stock Charts
Tools for stock charts
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35. 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
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36. StockCharts.com
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37. Annotating in StockCharts
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38. 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
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39. 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
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40. Homework / Reading “Technical Analysis: Introduction”
Investopedia Tutorial
Link is on the download page of the website
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