jfa techinal analysis part 1

8/18/2019 JFA Techinal Analysis Part 1

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Crash Course on Technical Analysis

JFA Edition


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• Basics

o

Quote Pageso Chart Patterns

• Technical Analysis

o Bull Bear Cycle

o

Elliot Waveo Market Quadrant and

Cycle

o Support And Resistance

Line

o

Reversal Roleso Stop/Cut Loss

o Reversal Patterns

o Magnitude and Duration

o

Trend Analysiso Area Patterns

o Oscillators

o Moving Averages and

Parabolic SAR

o

Fibonacci Retracementsand Pullbacks


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12+,$+


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34#"* 52-*


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6728"+

Line Chart

Line and Bar Chart

Candle Stick Chart


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'("*898*",(- :,(* 2(; 128 6728"+


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'("*898*",(- 62(;


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=*$7(,$2< >(2


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@72" ,+ =*$7(,$2< >(2


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14


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14


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B


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B


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C28%*" 342;82("


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C28%*" 342;82("• Q1: Bullish Trend Bearish Sentiment (BuTBeS)

o No interest stage – the worst is over, but people think its stillgoing down

o Interest rates raise slowly

• Q2: Bullish Trend Bullish Sentiment (BuTBuS)

o Investor are bullish, and the fundamentals are going up aswell

o Time where any stocks will profit, and prices go higher

• Q3: Bearish Trend Bullish Sentiment (BeTBuS)

o Be cautious, since economy is on its peak, and on the

verge of crashing

o

Investors still invest

• Q4 Bearish Trend, Bearish Sentiment (BeTBeS)

o No body invests

o Stock Prices keep falling


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C28%*" 6?$


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Support• A price level which, historically, a stock has had difficulty

falling below.• Thought of as the level at which BUYERS would be seen

entering the stock.• Support lines can be seen both horizontally and

diagonally.Resistance

• A price level which, historically, a stock has had difficultybreaking above.

•

Thought of as the level at which SELLERS would be seendisposing the stock.• Resistance lines can be seen both horizontally and

diagonally.


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Support Lines

Resistance Lines


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18*2%;#E( 2(; 18*2% F4"BREAKDOWN

• A break below the

support level.

BREAKOUT

•

A break above theresistance level.


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!=F5 H 6I= :F!!STOP LOSS

•

A price level that has been PREVIOUSLYidentified as the maximum loss a trade

can assume.

LONG – Support

SHORT – Resistance


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'JBK='LM'KN !=F5 :F!!


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=D>J'KN CB=OFJ!

1. Reversal Patterns

o Toppish

• Head and Shoulders

• Bottom and Top

o Bottom

• Rounding Bottom

2.

Coils(Consolidation/Area Patterns)3. Pullback (Trending)


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Head and

Shoulders

Bottom and Top

Rounding Bottom


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C>NK'=IJB >KJ JID>='FK

MAGNITUDE

• Sharp increase / decrease in price in a

short period of time.

•

Causes “OVERBOUGHT / OVERSOLD”condition.

DURATION

•

Sideways / Opposite of Trend movementof price.

• Removes “OVERBOUGHT / OVERSOLD”

condition.


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J'DB6='FK!1. UPTRENDo Uptrend line is drawn BELOW prices,

connecting lows / support levels.

2.

DOWNTREND

o Downtrend line is drawn ABOVE prices,

connecting highs/ resistance levels.

3.

SIDEWAYSo Horizontal lines connecting highs /

resistance or lows / support


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='CB 5BD'FJ!1.

MAJOR TREND / PRIMARY

o

Greater than 6 Months

2.

INTERMEDIATE TREND / SECONDARYo

2 – 6 Months

3.

MINOR TREND / TERTIARY

o

Less than 1 Month


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Uptrend Lines

Downtrend Lines


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=8*(; :,(*+Reminders:

• When looking at Uptrends find Support Linesrather than Resistance Lines

•

When looking at Downtrends find ResistanceLines rather than Support Lines

To form trend lines you need to find:

•

For Uptrend – L-H-HL-HH

• For downtrend – H-L-LH-LL

• As much as possible use 4 points or more


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>8*2 52P*8(+2 Kinds of Area Patterns1. Continuation Patterns

o Pattern that continues the previous trend

2. Reversal Patterns

o Pattern that reverses the previous trend


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=?9*+ FG >8*2 52P*8(+

• Box/ Rectangle

• Symmetrical Triangle

•

Ascending Triangle

• Descending Triangle

• Falling Wedge

• Rising wedge

• Channels


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Box Rectangle

Symmetric Triangle

Ascending Triangle


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Descending Triangle

Falling Wedge


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Channels

Rising Wedge


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>8*2 52P*8(+Reminders When Viewing Channels:• Break Out Of Downtrend channels

– Long• Break Down Of Uptrend Channels

– Sell / Short


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F+$,


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C>6JMoving Average Convergence Divergence• Consists of 3 lines

• MACD Line – calculated by subtracting the

26-day EMA from the 12-day EMA.

• Signal Line – a 9-day EMA of the MACD

• 0 – Line – acts as equilibrium level (not

overbought nor oversold)


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C>6J• When Macd is above the zero line, the stock is currently

over bought (means there is an accumulation of stock)

• When Macd is below the zero line, the stock is currentlyover sold.

• When Macd crosses the signal line from above – Short orSell.

• When Macd crosses the signal line from beneath - Longor Buy.

•

If above zero line, and Macd crosses signal line frombelow – Buy or Long.

• If below zero line, and Macd crosses from above - Shortor Sell.


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C>6J Q >8*2 52P*8(+


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C>6J Q >8*2 52P*8(+


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C>6J !7#8"


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C#),(- >)*82-*+ 2(; 5282R#D• Simple Moving Average

• Exponential Moving Average

•

Parabolic SAR• ADX/DMI


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!'C5:B CFS'KN >SBD>NB

• Average closing price of a stock over aspecified period of time.

•

260-Day 1 Year

• 130-Day 1/2 Year

• 65-Day 1/4 Year

•

32-Day 1/8 Year

• ONLY WORKS IN TRENDING ENVIRONMENTS.


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!'C5:B CFS'KN >SBD>NB


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BT9#(*(",2< C#),(- >)*82-*

• A simple moving average, except that moreweight is given to the latest data.

Calculation:• Today's Exponential Moving Average=(current day's closing price x Exponent)

+ (previous day's EMA x (1- Exponent))

•

To get the Exponent, simply take the number 2 and divide it by Days+1.

• 10-Day

• 20-Day


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BT9#(*(",2< C#),(- >)*82-*


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5282R#DA parabola below the price is generally bullish, while a parabolaabove is generally bearish.

Calculation:

SARn+1=SARn+(EP–SARn) Where SARn and SARn +1 representtoday’s and tomorrow’s SAR value

2 ways of using the Parabolic

1. Parabolic chasing price

o

Immediate action must be taken2. Price chasing parabolic

o Parabolic will act as temporary support or resistance


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5282R#D


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K#"*• The SMA, EMA, and Parabolic SAR may act asadditional support and resistance lines.

•

When Parabola is below prices, stock prices will rise• When Parabola is above prices, stock prices will

drop


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>JU H JC'•

An indicator used in technical analysis as anobjective value for the strength of trend. ADX is non-

directional so it will quantify a trend's strength

regardless of whether it is up or down.

• ADX is usually plotted in a chart window along withtwo lines known as the DMI (Directional Movement

Indicators).

• ADX is derived from the relationship of the DMI lines.

•

Requirements to confirm strong uptrend:

• ADX>30

• DMI+ > DMI-


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>JU H JC'


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L'1FK>66' DB=D>6BCBK=• The Fibonacci retracement is the potential

retracement of a stock’s original move in

price.

• Fibonacci retracements use horizontal lines

to indicate areas of support or resistance atthe key Fibonacci levels before it continues

in the original direction.

• These levels are created by drawing a

trendline between two extreme points andthen dividing the vertical distance by the

key Fibonacci ratios of 38.2%, 50%, 61.8%

and 100%.


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L'1FK>66' DB=D>6BCBK=


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Basically, in a wave, after the wave’sfour points have been identified, theexpected price will fall on one of the

three lines of the Fibonacci retracement

L'1FK>66' DB=D>6BCBK=


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• Accelerating index - Bullish trend

• When market is up, buy at the EMA price

•

Rangebounded markets - Going side ways• Issues on 32 day (not treanding, or adx below 30)

• Break of first uptick = buy (don’t buy on the nextday of the incremental increase since were still not

sure, so buy the next day after it) it will be safer.

• Use the SMA to watch this graph

I9",$% D4


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=28-*"+ BT9*$"2",#(10-DAY PULLBACK• New Highs, Parabolic

20-DAY PULLBACK

• Previous High, Channel Highs, Parabolic

32-DAY PULLBACK• Previous High


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C28%*" B(),8#(V*("+ 2(;

!4--*+"*; !"82"*-,*+• Market Environments:

o

Coiling/Quite

o

Acceleratingo

Volatile

o

Reversing


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!"82"*-,*+Coiling Markets Accelerating Markets

• Buy Low, Sell High

• Range tradingo

Buy when prices are on thesupport of box (area pattern),sell on resistance of box

• Buy on support lines

with less that 20 Slow

Stochastic

• Buy High, Sell Higher

• Buy and Hold

•

Flavor of the monthtrading

• Sell half and hold the

Balance (To Lock In

Profits)


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!"82"*-,*+Volatile market Reversing markets

• Swing trading

• Range trading

•

High Risk-RewardTrades only

• Sell into surges

• Buy on Resets


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D*V,(;*8+Risk VS Reward• For any amount of risk one should take, there should

be a significant amount of reward as well

•

Even if a trade was done poorly, with good riskmanagement, trades can still profit

Trending VS Non-Trending

• Profitable positions should never become a losingposition.

• Put a stop loss on the previous points based on

support or your EMA, but put an allowance belowthe support line to prevent whipsaws


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B(;


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!#48$*+W• http://www.investopedia.com/terms/t/technicalanalysis.asp

• CTS Internship Program 2012 Powerpoints by

Lawrence C. Lee V.P. Of Operationso

Oscillators

o

Moving Averages, Parabolic, ADX

o

Fibonacci Retracements and Pullbacks

o

Area Patterns

o Bull Bear Cycle, Elliot Wave

o Quote Page and Chart Patterns

o

Support and Resistance, Magnitude and Duration

o Trends

jfa techinal analysis part 1

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