guideline about stock market technical analysis

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Stock market technical analysis and fundamental analysis are two of the most common methods used by experts in predicting the movement of stocks

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Page 1: Guideline about Stock Market Technical Analysis
Page 2: Guideline about Stock Market Technical Analysis

Analysis of statistics generated by market activity such as past price and volume to come up with reasonable outcome in future using charts as a primary tool.

Should I take a long position? Should I take a short position? What is going to be the price tomorrow, next week or next year?

Introduction

Page 3: Guideline about Stock Market Technical Analysis

There are practically hundreds of factors that can affect the price and price movements of a particular currency or stock and the study and examination of all these factors together to create a proper prediction of price movements and fluctuations is called Fundamental Analysis. Technical analysis does not concern itself with other factors but rely solely on studying data and charts from past market actions and movements. This makes trading analysis great at analyzing a specific stock or currency's price movement through large time samples. Technical analysis can also follower more markets and market instruments at the same time and produce the results simultaneously.

Technical Analysis versus Fundamental Analysis

Page 4: Guideline about Stock Market Technical Analysis

The market discounts everything

Prices move in trends

History tends to repeat itself

Assumptions

Page 5: Guideline about Stock Market Technical Analysis

Line chart

Type of Charts

Page 6: Guideline about Stock Market Technical Analysis

Bar Chart

Type of Charts

Page 7: Guideline about Stock Market Technical Analysis

Volume Bar Chart

Type of Charts

Page 8: Guideline about Stock Market Technical Analysis

Candlestick Chart

Type of Charts

Page 9: Guideline about Stock Market Technical Analysis

The meaning of trend in finance isn't all that different from the general definition of the term - a trend is really nothing more than the general direction.

A trend represents a consistent change in prices (i.e. a change in investor’s expectations)

A trendline is a simple charting technique that adds a line to a chart to represent the trend in the market or a stock.

Trends

Page 10: Guideline about Stock Market Technical Analysis

Uptrends

Types of Trend

Page 11: Guideline about Stock Market Technical Analysis

Downtrend

Types of Trend

Page 12: Guideline about Stock Market Technical Analysis

Sideways Trend

Types of Trend

Page 13: Guideline about Stock Market Technical Analysis

Support and Resistance

Support level is a price level where the price tends to find support as it is going down

Page 14: Guideline about Stock Market Technical Analysis

Support and Resistance

Resistance Level is a price level where the price tends to find resistance as it is going up

Page 15: Guideline about Stock Market Technical Analysis

Importance of Support and Resistance

Support and resistance analysis is an important part of trends because it can be used to make trading decisions and identify when a trend is reversing

Page 16: Guideline about Stock Market Technical Analysis

Aware: Support and Resistance levels

Support and Resistance levels are highly volatile

Traders should not buy and sell directly at these points as there may be breakout also

Page 17: Guideline about Stock Market Technical Analysis

Breakout

The penetration of support and resistance level is called breakout

Page 18: Guideline about Stock Market Technical Analysis

Trader’s Remorse

Returning to the level of support or resistance after a breakout is called trader’s remorse.

Page 19: Guideline about Stock Market Technical Analysis

Trader’s Remorse

Page 20: Guideline about Stock Market Technical Analysis

Resistance <-> Support

Page 21: Guideline about Stock Market Technical Analysis

Indicators

A mathematical tool that can be applied on security’s price giving a result that can be used to anticipate trends, volatility and price

Indicators are used in two main ways: to confirm price movement and to form buy and sell signals

Page 22: Guideline about Stock Market Technical Analysis

Types of Indicator

LaggingThis indicator simply tells you what prices are doing, they don’t warn you of upcoming changes

LeadingThis indicators attempt to make investment calls on securities prior to actual price confirmation

Page 23: Guideline about Stock Market Technical Analysis

Moving Averages

A simple moving average is calculated by taking average of most recent closing prices of n time period

Exponential Moving average applies weighting factors which decrease exponentially

Page 24: Guideline about Stock Market Technical Analysis

Moving Averages

Page 25: Guideline about Stock Market Technical Analysis

Moving Averages Convergence Divergence

MACD is calculated by subtracting 26 days moving average from moving average of 12 days

Page 26: Guideline about Stock Market Technical Analysis

Trading using MACD

A 9 day moving average of MACD is plotted along with MACD

Page 27: Guideline about Stock Market Technical Analysis

Elliot Wave Theory

Elliot stated that stock market moves in repetitive cycles

Page 28: Guideline about Stock Market Technical Analysis

Impulse and Corrective Patterns

The impulse pattern consists of five waves, the five waves can be in either direction, up or down

Corrective patterns can be grouped into two different categories:

• Simple Correction( Zig-Zag ) • Complex correction (Flat, Irregular,

Triangle)

Page 29: Guideline about Stock Market Technical Analysis

Fractal Structure

The structures Elliott described meet the common definition of a fractal ( self-similar patterns appearing at every degree of trend)

Elliott Wave patterns that show up on long term charts are identical to, and will also show up on short term charts

Page 30: Guideline about Stock Market Technical Analysis

Fractal Structure

Page 31: Guideline about Stock Market Technical Analysis

Fibonacci Retracement Patterns

Stocks often pull back or retrace a percentage of the previous move before reversing

Retracement percentages follow a Fibonacci ratio pattern, the key Fibonacci ratios are 23.6, 38.2, 50, 61.8

Page 32: Guideline about Stock Market Technical Analysis

Fibonacci Retracement Patterns

Page 33: Guideline about Stock Market Technical Analysis

Linear Regression Lines

When prices are below the Linear Regression Line, this could be viewed as a good time to buy, and when prices are above the Linear Regression Line, a trader might sell

Page 34: Guideline about Stock Market Technical Analysis

Linear Regression Channel

A Linear Regression trendline shows where equilibrium exists but Linear Regression Channels show the range prices can be expected to deviate from a trendline

Page 35: Guideline about Stock Market Technical Analysis

Relative Strength Index

It compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset

RSI= 100- 100/ (1+RS)

RS=EMA[U]/EMA[D] EMA- exponential moving average

U= Sig (close (today)-close (yesterday)) D= Sig(close(yesterday)-close(today))

Page 36: Guideline about Stock Market Technical Analysis

Relative Strength Index

Relative Strength Index

Page 37: Guideline about Stock Market Technical Analysis

Stochastic Oscillator

Compares where a security’s price closed relative to its price range over a given time period

Fast oscillator Slow oscillator %D = SMA(%K, N)

Page 38: Guideline about Stock Market Technical Analysis

Stochastic Oscillator

Buy when the Oscillator (either %K or %D) falls below a specific level (e.g., 20) and then rises above that level. Sell when the Oscillator rises above a specific level (e.g., 80) and then falls below that level;

Buy when the %K line rises above the %D line and sell when the %K line falls below the %D line

Page 39: Guideline about Stock Market Technical Analysis

Thank you