into duct ion to technicals

8/8/2019 Into Duct Ion to Technicals

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Foundations of Technical

Analysis

Since all human actions obey laws, as

fixed as those ofgeometry, psychologyshould be studied in geometrical form,

and with mathematical objectivity

SpinozaSpinoza


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AnalysisThree premises on which Technical Analysis

builds up

Market action discounts everything

Prices move in trends

History repeats itself


3/16


AnalysisDefinition of Technical Analysis

Technical Analysis is the organized and systematic

study of a pictorial representation (chart) of the past

price actions of a particular item with a view toascertaining its expected future behavior.


4/16


AnalysisDO CHARTS TELL ANYTHING / EVERYTHING


5/16


AnalysisBasic tenets of the Dow Theory

1) Averages discount everything

2) Market has three (3) trends

3) Markets go through three (3) phases

4) Averages must confirm each other5) Volume must confirm the trend

6) A trend is in effect until it gives definite signals of

reversal


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Analysis

Technical Analysis addresses the simple question

WHEN TO DO WHAT ?


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Analysis

Investors must keep in mind that there is

a difference between a good company anda good stock


8/16


Analysis

Types of charts

1) Bar chart

2) Line or Close chart

3) Japanese Candlestick chart


9/16


AnalysisEXAMPLE OF A BAR CHART


10/16


AnalysisCharting techniques

Arithmetic scale

Log scale


11/16


Analysis

Concept of SUPPORT: Level at which

demand is expected to be stronger thensupply.

Concept of RESISTANCE: Level atwhich supply is expected to be stronger

then demand.


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Analysis

Functions of SUPPORT:

1. Level around which one can initiate longpositions

2. Used for putting stop loss orders.

3. Levels around one which can look to square shortside trades

4. Violation of important support levels indicate

possibility of further decline in the stock price.


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AnalysisFunctions of RESISTANCE:

1. Level around which one can initiate shortpositions

2. Used for putting stop loss orders.

3. Levels around one which can look to square longside trades

4. Violation of important resistance levels indicate

possibility of further advance in the stock price.


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AnalysisUptrend:

Higher tops and higher bottoms represent an uptrend

Down trend:

Falling tops and falling bottoms represent a downtrend


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AnalysisTrend-lines: lines on the chart which represent

a particular trend and also signal reversals insuch trends.

A trend line is formed by joining a series of tops (if the

trend is down) or bottoms (if the trend is up) andsuggests that the ongoing trend is in force as long as

the line is not violated.s


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AnalysisExample of Trend Lines

into duct ion to technicals

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