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How to Ease the Stress while Investing The tools are there but how do I use them? Trend Trading & Technical Analysis Using these tools as confirmation (buy vs sell). Overview… How to Guide. Moving Averages Fibonacci Retracements Gann Retracements Trend Lines Donchian Channels
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How to Ease the Stress while InvestingThe tools are there but how do I use them?Trend Trading & Technical AnalysisUsing these tools as confirmation (buy vs sell)
Overview…How to Guide • Moving Averages • Fibonacci Retracements • Gann Retracements • Trend Lines • Donchian Channels • Bollinger Bands • ATR Trailing Stop • Darvas Box • Support and Resistance • Combining Technical Indicators
This Presentation is: For Educational Purposes Only Does Not Give Specific Investing Advice Does Not Recommend any stocks to buy or sell All Investing has Substantial Risk of Big Losses
Moving Average lines • Moving averages smooth the price data to form a trend following indicator. They do not predict price direction, but rather define the current direction with a lag. Moving averages lag because they are based on past prices. Despite this lag, moving averages help smooth price action and filter out the noise. They also form the building blocks for many other technical indicators and overlays, such as Bollinger Bands, MACD and the McClellan Oscillator. The two most popular types of moving averages are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA). These moving averages can be used to identify the direction of the trend or define potential support and resistance levels. • Here's a chart with both an SMA and an EMA on it:
Moving Average lines Daily 10, 21, 34 & 50 • 10 Day moving average=Strong Up-trend • 21 Day moving average=Strong Up-trend for the Market (S&P 500, NASDAQ, DOW) • 34 Day moving average=Medium Strength Up-trend for stocks (early sell signal, any close below the 34 DMA) • 50 Day moving average=Week Up-trend for stocks (late sell signal, any close below the 50 DMA)
When to hold a big winner…. Early sell 10 Day violation vs Later sell 50 Day moving average, 7 Week Rule • Trade like an O’Neil Disciple: Seven Week Rule: Stocks that have a tendency to “obey” or “respect” the 10-day moving average for at least seven weeks in an uptrend should often be sold once the stock violates the 10-day line. If they don’t show such tendency, then it is better to use the 50-day moving average as your guide for selling. • Violation= closes below 10 day moving average and then trades below the low of that day. Early Sell.. Sell all or some, maybe 40-50%
When to sell using the 50 DMA • Gaps down/through the 50 day/10wk • Closes 6% below the 50 day • On the weekly chart, closes below the 50 day on 30% above average volume
Fibonacci Retracement • A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going higher). The Fibonacci retracement is the potential retracement of a financial asset's original move in price. Fibonacci retracements use horizontal lines to indicate areas of support or resistance at the key Fibonacci levels before it continues in the original direction. These levels are created by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%.
Dead Cat Bounce used in conjunction with Fibonacci Retracements • Definition of 'Dead Cat Bounce' • A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce is a small, short-lived recovery in the price of a declining security, such as a stock. Frequently, downtrends are interrupted by brief periods of recovery - or small rallies - where prices temporarily rise. This can be a result of traders or investors closing out short positions or buying on the assumption that the security has reached a bottom. A dead cat bounce is a price pattern that is usually identified in hindsight. Analysts may attempt to predict that the recovery will be only temporary by using certain technical and fundamental analysis tools.
Fibonacci Retracement: When the stock hits 100%, then retraces to one of the Golden Numbers (38.2%, 50.0% or 61.8%) it’s like a rubber-band being pulled down, then shooting back up. The Target Zone is 5 to 6 steps higher. This method only works during an uptrend. Be cautious when the market is in a correction. Target Zone Retrace 38.2%
Gann Retracements • Another way to determine the support and resistance is to combine angles and horizontal lines. For example, often a downtrending Gann angle will cross a 50% retracement level. This combination will then set up a key resistance point. The same can be said for uptrending angles crossing a 50% level. This area becomes a key support point. If you have a long-term chart, you will sometimes see many angles clustering at or near the same price. These are called price clusters. The more angles clustering in a zone, the more important the support or resistance.
Trend Lines • Technical analysis is built on the assumption that prices Trend. Trend lines are an important tool in technical analysis for both identification and confirmation. A Trend line is a straight line that connects two or more price points and then extends into the future to act as a line of support or resistance. Many of the principles applicable to support and resistance levels can be applied to trend lines as well. It is important that you understand all of the concepts presented in our Support and Resistance article before you continue.
