1. Basic Technical Analysis1
Basic Technical Analysis
Reference:
Technical Analysis of the Financial Markets
By John Murphy

2. What is Technical Analysis (TA)? Tenets of Technical Analysis
Topics
What is Technical Analysis (TA)?
Tenets of Technical Analysis
Dow Theory

3. What is Technical Analysis
Technical Analysis – study of market action, primarily through the use of charts, for the purpose of forecasting future price trends.
--Philosophy of Technical Analysis by John Murphy
Fundamental Analysis - study of economic, industry, and company conditions in an effort to determine the value of a company's stock. Fundamental analysis typically focuses on key statistics in a company's financial statements to determine if the stock price is correctly valued. --

4. 3 Tenets of Technical Analysis
Market price discounts everything
Prices move in trends
History repeats itself
All other factors in

5. Market price discounts everything
Tenets of Technical Analysis
Market price discounts everything
Supply and demand causes the price movement
Price action has considered all factors about the market/stock, both known and unknown
All things happening in the market that affect the market price, is ultimately reflected in the market price

6. Prices move in trend Tenets of Technical Analysis
Trend will continue unless the market proves otherwise

7. History Repeats Itself
Tenets of Technical Analysis
History Repeats Itself
Chart patterns were identified to have worked in the past, they are assume to work as well in the future

8. Charles Dow American Journalist 1851 - 1902
Dow Theory
Charles Dow
American Journalist
Co founded Dow Jones & Company
Founded the Wall Street Journal
Published his ideas in a series of articles he wrote in the Wall Street Journal
Published first stock market average composed of closing prices of 11 stocks
Eventually became Dow Jones Industrial Index (DJIA)
All other factors in

9. Basic Tenets of Dow Theory
The averages discount everything
The market has three trends
Major trends has three phases
The averages must confirm each other
Volume must confirm the trend
Trend is assumed to be in effect until it gives a definite signal that it has reversed
All other factors in

10. Basic Tenets of Dow Theory
The averages discount everything
The market has three trends
Major trends has three phases
The averages must confirm each other
Volume must confirm the trend
Trend is assumed to be in effect until it gives a definite signal that it has reversed
All other factors in

11. The Market Has Three Trends
Dow Theory
The Market Has Three Trends
Primary
Secondary/intermediate
corrections in primary trend
retraces between 1/3 to 2/3 of previous trend
more frequently half (50%) of previous move
Minor
lasts less than 3 weeks
All other factors in

12. Major Trends have Three Phases
Dow Theory
Major Trends have Three Phases
Participation
Distribution
Accumulation
All other factors in

13. Averages Must Confirm Each Other
Dow Theory
Averages Must Confirm Each Other
All other factors in

14. Volume Must Confirm the Trend
Dow Theory
Volume Must Confirm the Trend
Price
Volume
Down Trend
Up Trend
All other factors in

15. Volume Must Confirm the Trend
Dow Theory
Volume Must Confirm the Trend
Price
Volume
Down Trend (bearish)
Up Trend (bullish)
Price
Volume
Trend 1 up
bullish 2
down
bearish 3 4
All other factors in

16. Volume Must Confirm the Trend
Dow Theory
Volume Must Confirm the Trend
Price
Volume
Down Trend (bearish)
Up Trend (bullish)
Price
Volume
Trend 1 up
bullish 2
down
bearish 3 4
All other factors in

17. On average, Dow Theory misses 20 to 25% of a move before generating a signal. Many traders consider this to be too late.
Traders must remember that Dow never intended to anticipate trends; rather he sought to recognize the emergence of major bull and bear markets to capture the large middle portion of important market moves.
Technical Analysis of the Financial Markets
By John Murphy

18. Dow never intended his theory to forecast the direction of the stock market. He felt its real value was to use the stock market direction as a barometric reading of general business conditions.
In addition to formulating a great deal of today’s price forecasting methodology, he was among the first to recognize the usefulness of stock market averages as a leading economic indicator
Technical Analysis of the Financial Markets
By John Murphy

19. Thanks