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Introduction to Technical Analysis

Introduction to Technical Analysis . By Evan Friscia and Parth Thakkar. What is Technical Analysis. Technical analysis is a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume.

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Introduction to Technical Analysis

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  1. Introduction to Technical Analysis By Evan Friscia and ParthThakkar

  2. What is Technical Analysis Technical analysis is a security analysis discipline for forecasting the direction of prices through the study of past market data, primarily price and volume. Technical Analysts look at the CHARTS to make a prediction about the FUTURE!

  3. Tenets of Technical Analysis Market Action Discounts Everything Prices Move in Trends Trends (History) tend to Repeat themselves

  4. Lengths of Trends • Long term • 9 months or longer • Intermediary • 3 months to a 9 months, but no longer than a year • Short term • Days to weeks, but no longer than 3 months

  5. Chart Types Bar Chart Line Chart Japanese Candle Chart

  6. Bar Chart

  7. Line Chart

  8. Candlestick Chart

  9. Candlestick Chart

  10. Directions a Trend can take Up Trend Down Trend Horizontal Trend/Sideways or No Trend

  11. Uptrend A series of higher peaks and higher troughs on a price chart.

  12. Down Trend A series of lower peaks and lower troughs on the price chart

  13. Horizontal Trend/Sideways or No Trend A series of relatively similar peaks and troughs.

  14. Support Support is an imaginary price level that is difficult for a stock to move below because there are so many investors willing to buy at that level. It may be a horizontal or diagonal price level.

  15. Support

  16. Resistance Resistance is the opposite of support. It is an imaginary price level that is difficult for a stock to penetrate on the upside. It may be either a horizontal or diagonal price level. Resistance is created when the bears gain enough momentum to overwhelm the bulls and stop or reverse upward movement.

  17. Resistance

  18. Channels

  19. How do we Conduct Technical Analysis? Studies! A Technical Study is a function derived from the stock price, or an underlying factor that determines the stock price. When graphed, these functions allow give us the information needed to form a Bullish or Bearish opinion towards a stock!

  20. More on Technical Studies Overlays Oscillators Indicators

  21. Overlays Simple & Exponential Moving Averages Linear Regression Curve & Trendline • Bollinger Bands • Fibonacci Retracements

  22. Simple Moving Averages The average stock price over a certain period of time.

  23. Exponential Moving Averages A type of moving average that is similar to a simple moving average, except that more weight is given to the latest data.This type of moving average reacts faster to recent price changes than a simple moving average.

  24. Linear Regressions

  25. Bollinger Bands

  26. Fibonacci Retracements

  27. Indicators Moving Average Convergence Divergence (MACD) Relative Strength (RSI)

  28. MACD 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.

  29. MACD Application Observe the Crossovers

  30. MACD Application Observe the Crossovers

  31. MACD Application Observe the Crossovers

  32. Relative Strength Indicator A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine overbought and oversold conditions of an asset. It is calculated using the following formula: RSI = 100 - 100/(1 + RS*) *Where RS = Average of x days' up closes / Average of x days' down closes

  33. Relative Strength Indicator Application Observe when the RS crosses above the 70 line and below the 30 line

  34. Relative Strength Indicator Application Observe when the RS crosses above the 70 line and below the 30 line

  35. Relative Strength Indicator Application Observe when the RS crosses above the 70 line and below the 30 line

  36. Oscillators Stochastic Oscillator Projection Oscillator

  37. Stochastic Oscillator A technical momentum indicator that compares a security's closing price to its price range over a given time period The theory behind this indicator is that in an upward-trending market, prices tend to close near their high, and during a downward-trending market, prices tend to close near their low.

  38. Stochastic Oscillator Application Observe when the stochastic lines cross the bounding lines (just like RSI)

  39. Stochastic Oscillator Application Observe when the stochastic lines cross the bounding lines (just like RSI)

  40. Stochastic Oscillator Application Observe when the stochastic lines cross the bounding lines (just like RSI)

  41. Projection Oscillator The Projection Oscillator study shows the relationship between the current price and its minimum and maximum prices over time. Unlike the Stochastic Oscillator, here the minimum and maximum prices are adjusted up or down by the slope of the price's regression line.

  42. Projection Oscillator

  43. Questions

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