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Entries and Exits

Employing Technical Analysis. Entries and Exits. Technical Analysis (TA). Fundamental analysis: Analyzing business fundamentals using financial statements, valuation models, etc Technical analysis: Analyzing stock charts by identifying patterns in the stock price caused by supply and demand.

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Entries and Exits

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  1. Employing Technical Analysis Entries and Exits

  2. Technical Analysis (TA) • Fundamental analysis: Analyzing business fundamentals using financial statements, valuation models, etc • Technical analysis: Analyzing stock charts by identifying patterns in the stock price caused by supply and demand

  3. The Keys to TA • Price and Volume • The result 10,000 decisions, graphed • Everything else is derived from those two

  4. Supply and Demand • The magnitude of the move is determined by supply/demand factors • Impacted by the float size, type of shareholders • In the short run, supply/demand imbalance • can be caused by fundamentals • can supersede fundamentals

  5. Supply and Demand • Supply/demand sweet spot: • Owning a stock with a low float that is being accumulated by large funds • Stated float vs. effective float • What will cause investors to hoard or dump this stock?

  6. Supply and Demand

  7. Sentiment Cycles

  8. Sentiment Cycles

  9. Sentiment Cycles

  10. Toolbox and Examples • Price patterns • Support & resistance – trend lines (ASPS, BX) • Bottoming (BAC, OZM, BX, Silver) • Topping (AAPL, TZOO, Silver, S&P 500) • Continuation (ROP) • Volume patterns • Indicators • Moving averages • Stochastics / MACD / RSI

  11. Fundamentals & Momentum • Fundamentals should drive long term price • Effect of earnings surprises and rising consensus earnings estimates • Momentum may wane as investors await next catalyst • Price response to news is important indicator • Overbought vs oversold • Correction by time or price

  12. Entry Checklist • Price patterns: • Bottom: Losing downside momentum (double bottom, higher low, successful test of trendline, etc) • Breakout: Upside breakout after basing/consolidating (continuation patterns, rectangular breakout, etc) • Volume patterns: • Bottom: Declining volume on down days • Breakout: >Avg volume on breakout, up days

  13. Exit Checklist • Price patterns: • Top: Losing upside momentum (double top, lower high, etc) • Breakdown: Breakdown after basing/consolidating (continuation patterns, channels, etc) • Volume patterns: • Top: Higher volume on down days, declining volume on up days • Breakdown: >Avg volume on breakdown

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