technical anlysis

8/13/2019 Technical Anlysis

1/26

TECHNICAL ANLYSIS

INTRODUCTION:

Method of evaluating securities by analyzing statistics generated by market activity, such as past

prices and volume.

1.CHART TYPE

2.TREND

3.SOPPORT AND RESISTANCE

4.CHART PATTERNS

5.INDICATORS

1.CHART TYPE:

BAR CHART

LINE CHART

CANDILSTICK CHART

BAR CHART:


2/26

EXAMBLE:

LINE CHART:


3/26

HANDILSTICK CHART:

EXAMBILE:


4/26

2.TREND :

UP TREND

DOWN TREND

SIDEWAY TREND

3.SUPPORT AND RESISTANCE:

Support levelin a down move support is the level where price tends to stop its fall at least

temporary

Resistance levelthe opposite of support, in an up move this is the level where price tends to

stop its rise at least temporary


5/26

4. CHART PATERNS:

BULLISH ENGULFING PATTERN

BEARISH ENGULFING PATTERN

DARK CLOUD COVER

DOJI

DRAGONFLY DOJI

EVENING STAR

GRAVESTONE DOJI

HAMMER

HANGING MAN

HARAMI

INVERTED HAMMER

MORNING STAR

PIERCING PATTERN

SHOOTING STAR

WINDOWS TWEEZER TOPS AND BOTTOMS

DOUBLE BOTTOM

DOUBLE TOP

HEAD & SHOLDER

REVERSE HEAD & SHOLDER

CUBE

CUBE WITH HANDLE

BULLISH ENGULFING:

The Bullish Engulfing Candlestick Pattern is a bullish reversal pattern, usually occuring at the

bottom of a downtrend. The pattern consists of two Candlesticks


6/26

BEARISH ENGULFING:

The Bearish Engulfing Candlestick Pattern is a bearish reversal pattern, usually occuring at the

top of an uptrend. The pattern consists of two Candlesticks:

DARK CLOUD:

Essentially, the large black candle is forming a "dark cloud" over the preceding bullish trend.

The dark cloud must have a closing price that is:

1) within the price range of the previous day, but

2) below the mid-point between open and closing prices of the previous day.


7/26

DOJI:

The Doji is a powerful Candlestick formation, signifying indecision between bulls and bears. A

Doji is quite often found at the bottom and top of trends and thus is considered as a sign of possible

reversal of price direction, but the Doji can be viewed as a continuation pattern as well.

DRAGONFLY DOJI:

The Dragonfly Doji is created when the open, high, and close are the same or about the

same price (Where the open, high, and close are exactly the same price is quite rare). The most

important part of the Dragonfly Doji is the long lower shadow.


8/26

GRAVESTONE DOJI:

The Gravestone Doji is a significant bearish reversal candlestick pattern that mainly occurs

at the top of uptrends.

MORNINIG STAR:

The Morning Star Pattern is a bullish reversal pattern, usually occuring at the bottom of a

downtrend. The pattern consists of three candlesticks:

LargeBearish Candle(Day 1)

Small Bullish or Bearish Candle (Day 2)

LargeBullish Candle(Day 3)
http://www.onlinetradingconcepts.com/TechnicalAnalysis/Candlesticks/CandlestickBasics.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/Candlesticks/CandlestickBasics.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/Candlesticks/CandlestickBasics.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/Candlesticks/CandlestickBasics.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/Candlesticks/CandlestickBasics.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/Candlesticks/CandlestickBasics.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/Candlesticks/CandlestickBasics.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/Candlesticks/CandlestickBasics.html


9/26

EVENING STAR:

The Evening Star Pattern is a bearish reversal pattern, usually occuring at the top of an

uptrend. The pattern consists of three candlesticks:

LargeBullish Candle(Day 1)

Small Bullish or Bearish Candle (Day 2)

LargeBearish Candle(Day 3)

HAMMER:

The Hammer candlestick formation is a significant bullish reversal candlestick pattern that mainly

occurs at the bottom of downtrends.


10/26

INVERTED HAMMER:

The Inverted Hammer candlestick formation occurs mainly at the bottom of downtrends and is

a warning of a potential reversal upward. It is important to note that the Inverted pattern is a warning of

potential price change, not a signal, in and of itself, to buy.

HANGING MAN:

The Hanging Man candlestick formation, as one could predict from the name, is a bearish sign.

This pattern occurs mainly at the top of uptrends and is a warning of a potential reversal downward. It is

important to emphasize that the Hanging Man pattern is a warning of potential price change, not a signal,in and of itself, to go short.


11/26

HARAMI:

The Harami (meaning "pregnant" in Japanese) Candlestick Pattern is a reversal pattern. The

pattern consists of two Candlesticks:

LargerBullishorBearish Candle(Day 1)

Smaller Bullish or Bearish Candle (Day 2)

PIERCING LINE:

The Piercing Pattern is a bullish candlestick reversal pattern, similar to the Bullish Engulfing

Pattern. There are two components of a Piercing Pattern formation:


12/26

TWEEZER TOPS AND BOTTOMS:

The Tweezer Top formation is a bearish reversal pattern seen at the top of uptrends and

the Tweezer Bottom formation is a bullish reversal pattern seen at the bottom of downtrends.

WINDOWS:

Windows as they are called in Japanese Candlestick Charting, or Gaps, as they are called in the

west, are an important concept in technical analysis. Whenever, there is a gap (current open is not the

same as prior closing price), that means that no price and no volume transacted hands between the gap.


13/26

DOUBLE BOTTOM:

The Double Bottom technical analysis charting pattern is a common and highly effective

price reversal pattern.

DOUBLE TOP:

The Double Top technical analysis charting pattern is a common and highly effective price reversal

pattern.


14/26

HEAD AND SHOLDERS:

The Head and Shoulders chart pattern is a heavily used and quite profitable charting pattern,

giving easily understood buy and sell signals.

REVERSE HEAD AND SHOLDERS:

The opposite of the Head & Shoulders pattern is the Reverse Head & Shoulders pattern which is

another strong pattern, this time a bottoming pattern.


15/26

CUP:

As the stock comes up to test the old highs, the stock will incur selling pressure by the people who bought

at or near the old high. This selling pressure will make the stock price trade sideways with a tendency

towards a downtrend for four days to four weeks... then it takes off.

CUP WITH HANDLE:

As the stock comes up to test the old highs, the stock will incur selling pressure by the people who

bought at or near the old high. This selling pressure will make the stock price trade sideways with a

tendency towards a downtrend for four days to four weeks... then it takes off


16/26

FLAG:

The Flag pattern usually occurs after a significant up or down market move. After a strong move,

prices usually need to rest. This resting period usually occurs in the shape of a rectangle, thus the word

"flag". The Flag is considered a continuation pattern because after resting, prices will usually continue in

the direction they did before.

TRIANGLES:

The Triangle is a continuation patternusing the concepts of support and resistance and price

breakouts. The chart below of Amazon.com (AMZN) shows the Triangle continuation pattern:


17/26

5.INDICATORS:

ICHIMOKU KINKO HYO

ADVANCE DECLINE LINE

MACD

RSI

BOLLINGER BANDS

MOVING AVERAGE

PARABOLIC SAR

ICHIMOKU KINKO HYO:

Tenkan Sen("turning/conversion line") = (HIGHEST HIGH + LOWEST LOW)/2 for the past 9 periods

Kijun Sen("standard/base line") = (HIGHEST HIGH + LOWEST LOW)/2 for the past 26 periods

Senkou Span A("leading span 1") = (Tenkan Sen + Kijun Sen)/2 time-shifted forward 26 periods (intothe future)

Senkou span B("leading span 2") = (Highest High + Lowest Low)/2 for the past 52 periods time-shifted

forward 26 periods (into the future)

Astrongtenkan sen/kijun sen cross Buy (Sell) signal takes place when a bullish cross happens above

(below) the kumo.


18/26

Aneutraltenkan sen/kijun sen cross Buy/ Sell signal takes place when a bullish cross happens within

the kumo.

Aweaktenkan sen/kijun sen cross Buy (Sell) signal takes place when a bullish cross happens below

(above) the kumo.

ADVANCE DECLINE LINE (ADL):


19/26

Trading with ADL involves the following signals:

ADL is rising and so does the priceuptrend is healthy.

ADL is falling and so does the pricedowntrend is healthy.

Divergence between ADL and price - changes/pauses in the trend should be expected.

ADL = (N of Advancing IssuesN of Declining Issues) + Previous Period's ADL Value

AVERANGE DIRECTIONAL INDEX:

Analysis of ADXis a method of evaluating trend and can help traders to choose the strongest trendsand also how to let profits run when the trend is strong.


20/26

MACD:

The MACD indicator is one of the most popular technical analysis tools. There are three main

components of the MACD shown in the picture below:

1. MACD: The 12-period (EMA) minus the 26-period EMA.2. MACD Signal Line: A 9-period EMA of the MACD.

3. MACD Histogram: The MACD minus the MACD Signal Line.

The primary method of interpreting the MACD is with moving average crossovers. When the shorter-

term 12-period exponential moving average (EMA) crosses over the longer-term 26-period EMA a buy

signal is generated

Bearish divergenceoccurs when a technical analysis indicator is suggesting that a price should be going

down but the price of the stock, future, or currency pair is continuing to maintain its current uptrend.

Bullish divergenceoccurs when the indicator is indicating that price should be bottoming and heading

higher, yet the actual price action is continuing downward.

One interpretation is that a positive MACD value is a bullish signal, and a negative MACD value is a

bearish signal.


21/26

RSI:

One of the most popular technical analysis indicators, the Relative Strength Index (RSI) is an oscillator

that measures current price strength in relation to previous prices. The RSI is a versatile tool, it can be

used to:

Generate buy and sell signals

Show overbought and oversold conditions

Confirm price movement

Warn of potential price reversals through divergences

RSI Buy Signal

Buy when the RSI crosses above the oversold line (30).

RSI Sell Signal

Sell when the RSI crosses below the overbought line (70).


22/26

BOLLINGER BANDS:

Bollinger Bands is a versatile tool combining moving averages and standard deviations and is

one of the most popular technical analysis tools available for traders. There are three components to the

Bollinger Band indicator:

1. Moving Average: By default, a 20-period simple moving average is used.

2. Upper Band: The upper band is usually 2 standard deviations (calculated from 20-periods of

closing data) above the moving average.

3. Lower Band: The lower band is usually 2 standard deviations below the moving average.

Buy Signal

In the example shown in the chart below of the E-mini S&P 500 Future, a trader buys or buys to cover

when the price has fallen below the lower Bollinger Band.

Sell Signal

The sell or buy to cover exit is initiated when the stock, future, or currency price pierces outside the upper

Bollinger Band.


23/26

Basically the opposite of "Playing the Bands" and betting on reversion to the mean is playing Bollinger

Band breakouts. Breakouts occur after a period of consolidation, when price closes outside of the

Bollinger Bands. Other indicators such as support and resistance lines (see:Support & Resistance)can

prove beneficial when deciding whether or not to buy or sell in the direction of the breakout.

There are two basic ways to trade volatility:

1. Buy options with low volatility in hopes that volatility will increase and then sell back thoseoptions at a higher price.

2. Sell options with high volatility in hopes that volatility will decrease and then buy back those

same options at a cheaper price.
http://www.onlinetradingconcepts.com/TechnicalAnalysis/ClassicCharting/SupportResistance.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/ClassicCharting/SupportResistance.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/ClassicCharting/SupportResistance.htmlhttp://www.onlinetradingconcepts.com/TechnicalAnalysis/ClassicCharting/SupportResistance.html


24/26

MOVING AVERANGE:

An indicator frequently used in technical analysis showing the average value of a security's price

over a set period. Moving averages are generally used to measure momentum and define areas of possible

support and resistance.

PARABOLIC SAR:

The Parabolic Stop and Reverse (SAR) indicator combines price and time components

to generate buy and sell signals. The Parabolic SAR is also effective as a tool todetermine where to

place stop loss orders.

The chart below of the 100 ounce Gold futures contract is a good illustration showing buy and sell signals

generated by the Parabolic Stop and Reverse (SAR) technical indicator:


25/26

Parabolic SAR Buy Signal

Buy when the price closes above the upper Parabolic SAR. When the Parabolic SAR changes from being

above price to below price, then the stock, futures, or currency trader should "stop" and buy to cover their

existing shortsell and "reverse" direction and buy to go long.

Parabolic SAR Sell Signal

A sell signal is generated whent the price closes below the lower Parabolic SAR. At the time that the

Parabolic SAR changes from being below price to being above price, the trader should "stop" and sell to

exit their existing long trade and "reverse" direction and sell to go short.


26/26

The Parabolic SAR is an effective stop loss placement tool for two reasons:

1. It acts as a trailing stop. Rather than putting in one stop loss below where a trader entered a long

position or above where the trader entered a short position, using the Parabolic SAR as a trader's

guide, the stop loss is gradually raised for a long position and lowered in a short position,

effectively locking in any profits.

2. It acts as a time stop. Time stops are used by traders because they enter in buy or sell orders

expecting a certain move to occur. If the expected move never occurs and the reason the trader

initiated the trade is no longer relavent, then the trader should exit their trade. Similarly, the

Parabolic SAR incorporates time into its calculation making sure a stock, future, or currency trade

is working for the trader, if the trade is not moving in the desired direction, the Parabolic SAR

will signal an exit.

technical anlysis

Documents