sapm presentaion

8/10/2019 SAPM presentaion

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TECHNICAL ANALYSIS


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Introduction

Technical analysis is the attempt to forecaststock prices on the basis of market-deriveddata.

Technicians (also known as quantitativeanalysts or chartists) usually look at price,volume and psychological indicators overtime.

They are looking for trends and patterns in thedata that indicate future price movements.


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The market discounts everything

Prices move in trends

History tends to repeat itself

Assumptions


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The Bar Chart


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The Bar Chart

Some of the mostpopular type ofcharts

Advantage is thatit show the high,low, open and

close for each day


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Line Chart


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Candle Stick Charting


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Candle Stick Charting

Green is an exampleof a bullish pattern,the stock opened at(or near) its low andclosed near its high

Red is an example ofa bearish pattern.The stock opened at(or near) its high anddropped substantiallyto close near its low


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Point and Figure Chart

Somewhat rare Plots day-to-day increases and declines in

price. A rising stack of XXXXs represents increases A rising stack of OOOOs represents decreases. Typically used for intraday charting If used for multi-day study, only closing prices

will be used


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Point and Figure Chart


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

A trend represents a consistent change in prices (i.e. a changein investors expectations)

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

Trends


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Dow Theory

Dow Theory the grandfather of trend analysis is the Dow Theory, named

after its creator, Charles Dow (who established The Wall Street Journal).Many of todays more technically sophisticated methods are essentiallyvariants of Dows approach. The Dow Theory posits three forcessimultaneously affecting stock price:

The primary trend is the long-term movement of prices, lasting fromseveral months to several years.

Secondary or intermediate trends are caused by short-term deviation ofprices from the underlying trend line. These deviations are eliminatedvia corrections when prices revert back to trend values.

Tertiary or minor trends are daily fluctuations of little importance.


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In Dow theory, the primary trend is the major trend of the

market, which makes it the most important one to determine.

The primary trend will also impact the secondary andminor trends within the market.


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The primary trend will also impact the secondary andminor trends within the market.

Dow determined that a primary trend will generally last between one and three years but could vary in some instances.

For example, if in an uptrend the price closes below thelow of a previously established trough, it could be a signthat the market is headed lower, and not higher.

Regardless of trend length, the primary trend remains ineffect until there is a confirmed reversal.


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In Dow theory, a primary trend is the main direction inwhich the market is moving.

Conversely, a secondary trend moves in the oppositedirection of the primary trend, or as a correction to the

primary trend.

For example, an upward primary trend will be composedof secondary downward trends.


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This is the movement from a consecutively higher highto a consecutively lower high. In a primary downwardtrend the secondary trend will be an upward move, or arally.

This is the movement from a consecutively lower low toa consecutively higher low.

Below is an illustration of a secondary trend within a primary uptrend.


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The last of the three trend types in Dow theory is theminor trend, which is defined as a market movementlasting less than three weeks.


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Due to its short-term nature and the longer-term focus of

Dow theory, the minor trend is not of major concern toDow theory followers.

The minor trend is generally the corrective moves withina secondary move, or those moves that go against thedirection of the secondary trend.

But this doesn't mean it is completely irrelevant; the

minor trend is watched with the large picture in mind, asthese short-term price movements are a part of both the primary and secondary trends.


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Uptrends

Types of Trend


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Downtrend

Types of Trend


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Sideways Trend

Types of Trend


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Support and Resistance

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


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Support and Resistance

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


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Importance of Support and Resistance

Support and resistance analysis is an important partof trends because it can be used to make tradingdecisions and identify when a trend is reversing


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Aware: Support and Resistance levels

Support and Resistance levels are highlyvolatile

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


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Cup and Handle

A cup and handle chart is a bullish continuation pattern inwhich the upward trend has not stopped but has onlypaused for some time and continue in an upward directiononce the pattern is confirmed. This price pattern forms whatlooks like a cup which is preceded by an upward trend thehandle follow the cup formation and is formed by agenerally downward sideways movement in the securityprice.


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Triangles

Triangles are some of the most well-known chart pattern used intechnical analysis symmetrical triangle ascending and descendingtriangle are the three types of triangles which vary in the way theyare constructed and what they imply these chart pattern areconsidered to last anywhere from a forth night to several months


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Flag and Pennant

When there is a sharp price movement followed by a generallysideways price movement these two short term chart pattern are thecontinuation pattern that are formed this pattern is then complete

upon another sharp price movement in same direction as the movethat started the trend the pattern are generally thought to last fromone to three weeks.


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Wedge

The wedge chart pattern can be either a continuation or reversalpattern it is similar to asymmetrical triangle generally shows asideways movement the other difference is that wedge tend to formover longer period usually between three and six months.


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Triple Tops and Bottoms.

Another type of reversal chart pattern I chart analysis triple tops andtriple bottoms these act in a similar fashion as head and shoulder anddouble tops and bottoms but are not equally prevalent in charts thesetwo chart patterns are formed when the price movement test a level

of support or resistance three times and is unable to break throughthis signals a reversal of the prior trend triple tops and bottom canlead to confusion during the formation of the pattern because theycan look similar to other chart pattern after the first two support testare formed in the price movement .


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Rounding Bottom

A rounding bottom also referred to as a saucer bottom is a long termreversal pattern which signals a shift from a downward trend to anupward trend this pattern is traditionally thought to last anywhere

from several months to several years .

A rounding bottom chart pattern looks similar to a cup and handlepattern but without the long term nature of this pattern and the lackof a confirmation trigger such as the handle in the cup and make it a

difficult pattern to trade.


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