Presented by Dr. Arshad Hassan

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Presented by

Dr. Arshad Hassan


 Technical analysis is a process of security
analysis discipline for forecasting the
direction of prices through the study of
past market data, primarily price and
volume
 Joseph de la Vega
 Homma Munehisa
 Elliott Wave Theory interprets market actions in
terms of recurrent price structures
 Market cycles are composed of two major types of
Wave : Impulse Wave and Corrective Wave
 Every impulse wave can be sub-divided into 5 -
wave structure
 Every corrective wave can be sub-divided into 3 -
wave structures.
 Markets have three movements/trends
1. Primary movement
2. Medium swing
3. Short swing
 Trends have three phases

1. Accumulation phase
2. Public participation phase
3. Distribution phase
 Stock market discounts all news
 Stock market averages must confirm each
other
 Trends are confirmed by volume
 Trends exist until definitive signals prove that
they have ended
 Analysts use various tools and
techniques to identify trends and patterns
which can aid in predictions of future
market movements
 Data can be depicted in different ways through
the use of various chart styles, each presenting
a unique view of the same information. These
include:
 Line Charts
 Bar Charts
 Candlestick Charts
 Support is a floor price

 Resistance is a ceiling price


Support is tested over 6 times in this instance
Resistance becomes
support
There are 3 major trends that can be seen in the
market:

 Bear/Downward
 Bull/Upward
 Consolidation (no trend)
Uptrends are characterized by
rising bottoms on the stock
chart and can be described as
periods of optimism
Downtrends are characterized by falling
tops or bottoms on the price chart, and can
be described as periods of pessimism
 Price Movement
 Volatility
 Momentum
 Volume
 Others
 Moving Average - Simple
 - Exponential
 - Weighted
 ADI
This Chart uses 14
(red), 30 (green), and
200 (purple) day MAs*

Crossing a longer term


MA, further reinforcing
the buy signal

Buy Signal due to cross


of the 14 and 30 day
MAs
 Bollinger Bands

 Standard Deviation
 A band plotted 2 standard deviations away from a
simple moving average.
 When the markets become more volatile, the
bands widen and during less volatile periods, the
bands contract
 The tightening of the bands is often used as an
early indication that the volatility is about to
increase sharply
 The closer the prices move to the upper band, the
more overbought the market, and the closer the
prices move to the lower band, the more oversold
the market
Uptrend; staying
within Upper Band

Upper Band

Downtrend;
staying within
Lower Band

Lower Band
 MACD
 RelativeStrength Index – RSI
 Stochastic
 Shows the relationship between two moving
averages of prices
 There are three common methods used to
interpret the MACD:
1. Crossovers
2. Divergence
3. Dramatic Rise
SEL
L

BU BU
Y Y
 compares the magnitude of recent gains to
recent losses in an attempt to determine
overbought and oversold conditions of an asset
 The RSI ranges from 0 to 100
 Above 70; overvalued
 Under 30; undervalued
 RSI = 100 – [100/1 +RS]

RS = Average of n periods closes up/Average of


n periods closes
Oversold period;
bullish
 Simply indicates the activity of the stock,
whether it is being moved in large amount or
barely being traded at all

 Helped to indicate when big movements are


likely
High
Low Volume,
Volume, big
small
movement
movements
 Hammer and Hanging Man
 Doji
 Harami
 Shooting Star
 Head and Shoulders
 Double Tops (Bottoms)
 Flags and Pennants
 Doji
 Harami
 Shooting Star
 Hammer and Hanging Man
Head

Right
Left
Shoulder
Shoulder
 Flags result from price fluctuations within a narrow
range and mark a consolidation before the previous
move continuous on
 Pennant formations are often treated like flag
formations because they are very similar in
appearance
 The key difference is merely that flags have a
parallelogram-like shape, and pennants are more
triangular
Rectangular,
indicating a flag
pattern
 Trend is Friend.
 Usage of multiple tools can increase your
chances of success
 Combining Bollinger Bands with MACD, for
example, can be one traders strategy while
another trades purely off of pattern formations
 Play around and see what you find to be most
effective in your particular market

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