into duct ion to technicals
TRANSCRIPT
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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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Foundations of Technical
AnalysisThree premises on which Technical Analysis
builds up
Market action discounts everything
Prices move in trends
History repeats itself
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Foundations of Technical
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.
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Foundations of Technical
AnalysisDO CHARTS TELL ANYTHING / EVERYTHING
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Foundations of Technical
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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Foundations of Technical
Analysis
Technical Analysis addresses the simple question
WHEN TO DO WHAT ?
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Foundations of Technical
Analysis
Investors must keep in mind that there is
a difference between a good company anda good stock
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Foundations of Technical
Analysis
Types of charts
1) Bar chart
2) Line or Close chart
3) Japanese Candlestick chart
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Foundations of Technical
AnalysisEXAMPLE OF A BAR CHART
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Foundations of Technical
AnalysisCharting techniques
Arithmetic scale
Log scale
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Foundations of Technical
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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Foundations of Technical
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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Foundations of Technical
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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Foundations of Technical
AnalysisUptrend:
Higher tops and higher bottoms represent an uptrend
Down trend:
Falling tops and falling bottoms represent a downtrend
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Foundations of Technical
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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Foundations of Technical
AnalysisExample of Trend Lines