19538242 technical analysis notes

8/14/2019 19538242 Technical Analysis Notes

1/6

Dirty Rotten Tricks Of Institutional Traders And How Knowing This Will Help YouAvoid Themhttp://www.guerillastocktrading.com/stock-trading/dirty-rotten-tricks-of-institutional-traders-and-how-knowing-this-will-help-you-avoid-them

PREDATOR OR PREY?http://www.hardrightedge.com/wizard/ss1.htm

http://trendsenseresearch.blogspot.com/2009/05/day-traders.html

Follow institutional traders--here's howhttp://www.tradingmarkets.com/.site/stocks/commentary/todaysetfo/01262006-48953.cfm

August 10, 2005August 17, 2005

20090627VRX

CERN

HMSY

http://stockcharts.com/school/doku.php?id=chart_schoolhttp://stockcharts.com/school/doku.php?id=chart_school:overview{I} Overview of Financial Analysis -

[A] Technical Analysis:

Overall Trend: The first step is to identify the overall trend.This can be accomplished with trend lines, moving averages or peak/troughanalysis.As long as the price remains above its uptrend line, selected moving averages orprevious lows, the trend will be considered bullish

Support: Areas of congestion or previous lows below the current price mark supportlevels.A break below support would be considered bearish.

Resistance: Areas of congestion and previous highs above the current price markthe resistance levels.

A break above resistance would be considered bullish.

Momentum: Momentum is usually measured with an oscillator such as MACD.If MACD is above its 9-day EMA (exponential moving average) or positive, thenmomentum will be considered bullish, or at least improving

Buying/Selling Pressure: For stocks and indices with volume figures available, anindicator that uses volume is used to measure buying or selling pressure.When Chaikin Money Flow (CMF) is above zero, buying pressure is dominant.Selling pressure is dominant when it (CMF) is below zero


2/6

Relative Strength: The price relative is a line formed by dividing the security bya benchmark.For stocks it is usually the price of the stock divided by the S&P 500.The plot of this line over a period of time will tell us if the stock isoutperforming (rising) orunder performing (falling) the major index

Strengths of Technical Analysis:

1. Focus on Price2. Supply, Demand, and Price Action

In its most basic form, higher prices reflect increased demand andlower prices reflect increased supply.

3. Support/Resistance4. Pictorial Price History5. Assist with Entry Point

Some analysts use fundamental analysis to decide what to buy and technicalanalysis to decide when to buy.

Weaknesses of Technical Analysis:1. Analyst Bias2. Open to Interpretation

It should be pointed out that technical analysis is more like an art than ascience, somewhat like economics.

Is the cup half-empty or half-full? It is in the eye of the behold.3. Too Late4. Always Another Level5. Trader's Remorse

A 50-day moving average may work great to identify support and resistance forIBM,

but a 70-day moving average may work better for Yahoo.Even though many principles of technical analysis are universal, each security

will have its own idiosyncrasi.

[B] What is Fundamental Analysis?

Fundamental analysis is theexamination of the underlying forces thataffect the well being ofthe economy,industry groups, andcompanies.

To forecast future stock prices,fundamental analysis combineseconomic,industry, and

company analysisto derive a stock's current fair value and forecast future value

General Steps to Fundamental EvaluationEconomic Forecast:

The economy is like the tide and the various industry groups and individualcompanies are like boats.

When the economy expands, most industry groups and companies benefit and grow.When the economy declines, most sectors and companies usually suffer.Many economists link economic expansion and contraction to the level of

interest rates. Interest rates are seen as a leading indicator for the stock


3/6

market as well.Once a scenario for the overall economy has been developed, an investor can

break down the economy into its various industry group.Group Selection:

If the prognosis is for an expanding economy, then certain groups are likely tobenefit more than othes.

A growth strategy might involve the purchase oftechnology,

biotech,semiconductor andcyclical stocks.

A defensive strategy might involve the purchase ofconsumer staples,utilities andenergy-related stocks.

When stocks move, they usually move as groups; there are very few lone guns outthere.

Many times it is more important to be in the right industry than in the rightstock!Narrow Within the Group:Company Analysis:

Business PlanManagementFinancial Analysis

Strengths of Fundamental Analysis:1. Long-term Trends2. Value Spotting3. Business Acumen4. Knowing Who's WhoWeaknesses of Fundamental Analysis:1. Time Constraints2. Industry/Company Specific3. Subjectivity

4. Analyst Bias5. Definition of Fair Value

[C] Random Walk TheoryThe basic random walk premise is that price movements are totally random.Malkiel maintains that a buy and hold strategy is best and individuals should notattempt to time (or beat) the market.

"The more creativity you bring to the investment process, the more rewarding itwill be.The only way to maintain ongoing success, however, is to constantly innovate.That's much the same in all endeavors.

The only way to continue making money, to continue growing and keeping your profitmargins healthy, is to constantly come up with new ideas."

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis{II} How to Analyze Charts -

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:what_are_charts[A] What Are Charts?

A price chart is a sequence of prices plotted over a specific time frame.


4/6

In statistical terms, charts are referred to as time series plotsOn the chart, the y-axis (vertical axis) represents the price scale andthe x-axis (horizontal axis) represents the time scale.How to Pick a Time Frame:How Are Charts Formed?1. Line Chart - By paying attention to only the close, intraday swings can be

ignored. Line charts are also used when open, high and low data points are notavailable.

2. Bar Chart - Perhaps the most popular charting method is the bar chart. Thehigh, low and close are required to form the price plot for each period of a barchart.

The high and low are represented by the top and bottom of thevertical bar and

the close is the short horizontal line crossing the verticalbar.

Bar charts can also be displayed using the open, high, low andclose.

The only difference is the addition of the open price, whichis displayed as a short horizontal line extending to the left of the bar.

3. Candlestick Chart - For a candlestick chart, the open, high, low and closeare all required.

Many traders and investors believe that candlestickcharts are easy to read, especially the relationship between the open and theclose.

White (clear) candlesticks form when the close ishigher than the open and

black (solid) candlesticks form when the close is lowerthan the open.

The white and black portion formed from the open andclose is called the body (white body or black body).

The lines above and below are called shadows andrepresent the high and low.

4. Point & Figure Chart - Point & Figure Charts are based solely on pricemovement,

and do not take time into consideration.There is an x-axis but it does not extend evenly

across the chart.Point & Figure charts consist of columns of X's and

O's that represent filtered price movements over time.On a P&F chart price movements are combined into either a rising column of

X's or a falling column of O's.If you are familiar with standard chart analysis, you can think of each

column as representing either an uptrend or a downtrend.Each X or O occupies what is called a box on the chart.Each chart has a setting called the Box Size that is the amount that a

stock needs to move above the top of the current column of X's (or below thebottom of the current column of O's) before another X (or O) is added to that

column.Each chart has a second setting called the Reversal Amount that determines

the amount that a stock needs to move in the opposite direction (down if we are ina rising column of X's, up for a column of O's) before a reversal occurs.

Whenever this reversal threshold is crossed, a new column is started rightnext to the previous one, only moving in the opposite direction.http://stockcharts.com/help/doku.php?id=chart_school:chart_analysis:pnf_charts

Traditionally, the box size is set to 1 and the reversal amount is 3.The number on the vertical axis represents the value of the "floor" of the

box. The "ceiling" of the box is equal to the floor + the box size.If prices move anywhere inside that range of values, the box is filled in


5/6

with an "X" or and "O".Is it important to remember that P&F charts do not show time in a linear

fashion. Each column can represent one day, or many days, depending on the pricemovement.

Because of the nature of P&F charts, support and resistance levels arealways horizontal lines and trend lines always appear at 45 angles.

Support Levels - You can spot support levels on P&F charts by lookingfor a horizontal row of Os that each mark the bottom of their respective columns.

Resistance Levels - Like support levels, resistance levels are horizontallines on P&F charts. They mark the upper level for trading, or a price at whichsellers typically outnumber buyers. Find them by looking for a row of X's.

Upward Trend Lines -Downward Trend Lines -

5. Price ScalingThere are two methods for displaying the price scale along the y-axis:

arithmetic and logarithmic.

[B] Support and ResistanceSupport and resistance represent key junctures where the forces of supply and

demand meet.Supply is synonymous with bearish, bears and selling.

Demand is synonymous with bullish, bulls and buying.As demand increases, prices advance and as supply increases, prices decline.When supply and demand are equal, prices move sideways as bulls and bears slug

it out for control.What Is Support?Support is the price level at which demand is thought to be strong enough to

prevent the price from declining further.Support does not always hold and a break below support signals that the bears

have won out over the bulls.Once support is broken, another support level will have to be established at

a lower level.Support levels are usually below the current price, but it is not uncommon

for a security to trade at or near support.

What Is Resistance?Resistance is the price level at which selling is thought to be strong enough

to prevent the price from rising further.Resistance does not always hold and a break above resistance signals that the

bulls have won out over the bears.Once resistance is broken, another resistance level will have to be

established at a higher level.Resistance levels are usually above the current price, but it is not uncommon

for a security to trade at or near resistance.

[C]

[D]

[E]

[F]

[G]


6/6

19538242 technical analysis notes

Documents