Using its tools to spot Using its tools to spot Chart Patterns, Candle Chart Patterns, Candle

Patterns, Patterns, Ratios, and Divergences.Ratios, and Divergences.

TASUG Meeting – November/2003TASUG Meeting – November/2003

Andy NogueiraAndy Nogueira

Breadth ChartsBreadth Charts

Market CarpetMarket Carpet

PerfChartsPerfCharts

SharpChartsSharpCharts

StockScansStockScans

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Part I - Stockcharts ToolsPart I - Stockcharts Tools

Part II – Using Stockcharts to spotPart II – Using Stockcharts to spot

Candlestick PatternsCandlestick Patterns• Bullish / BearishBullish / Bearish

DivergencesDivergences• Positive / NegativePositive / Negative

Chart PatternsChart Patterns• Reversal / ContinuationReversal / Continuation

RatiosRatios• Intermarket AnalysisIntermarket Analysis

Breadth ChartsBreadth Charts

Shows Market Breadth for Shows Market Breadth for

• NYSENYSE• Advancing / DecliningAdvancing / Declining• Highs / LowsHighs / Lows

• NASDAQNASDAQ• Advancing / DecliningAdvancing / Declining• Highs / LowsHighs / Lows

• AMEXAMEX• Advancing / DecliningAdvancing / Declining• Highs / LowsHighs / Lows

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Market CarpetMarket Carpet Lets you see at a glance Lets you see at a glance

what the entire market is what the entire market is doing as well as the sectors doing as well as the sectors and companies within the and companies within the market. market.

Available Predefined CarpetsAvailable Predefined Carpets• S&P Sector Carpet S&P Sector Carpet • Market Summary Carpet Market Summary Carpet • Fidelity Fund Carpet Fidelity Fund Carpet • Rydex Fund Carpet Rydex Fund Carpet • Toronto Stock Exchange Toronto Stock Exchange

Perfcharts CarpetPerfcharts Carpet

Lets you compare two or Lets you compare two or more different stocks, more different stocks, indices, or mutual funds indices, or mutual funds during a period of time.during a period of time.

Display price performance Display price performance lines for up to 10 different lines for up to 10 different financial datasets financial datasets

Line Graph or Histogram Line Graph or Histogram (Total Return)(Total Return)

Line Graph

Histogram

SharpchartsSharpcharts

Create bar charts, line charts Create bar charts, line charts and candlestick charts for more and candlestick charts for more than 20,000 stocks, indices, than 20,000 stocks, indices, and mutual funds.and mutual funds.

Intraday, daily, weekly and Intraday, daily, weekly and monthly charts in a variety of monthly charts in a variety of sizes and color schemes sizes and color schemes

Create lists of annotated chartsCreate lists of annotated charts

Annotated Charts

Stock ScansStock Scans Create your own scans to Create your own scans to

find stocks in the database find stocks in the database that meet certain technical that meet certain technical conditions and criteriaconditions and criteria

Predefined Scans:Predefined Scans:• Technical Indicators Technical Indicators

• Candlestick PatternsCandlestick Patterns

• P&F AlertsP&F Alerts

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Candlestick PatternsCandlestick Patterns

Bullish PatternsBullish Patterns• Morning StarMorning Star• Bullish Abandon BabyBullish Abandon Baby• Bullish EngulfingBullish Engulfing

Bearish PatternsBearish Patterns• Evening StarEvening Star• Dark Cloud CoverDark Cloud Cover

Candlestick FormationCandlestick Formation

DOWNUP

•  A downtrend is under way

• First day is a long black day • Second day gaps below the

1st day's close • Third day is a long white day.

Morning StarMorning Star

Morning StarMorning Star

• A downtrend is under way

• First day is a black day.

• Second day is a doji whose shadows gaps below the 1st day's close.

• Third day is a white day with no overlapping shadows.

Bullish Abandon BabyBullish Abandon Baby

Bullish Abandon Baby Bullish Abandon Baby

• The color of the first day's body reflects the trend.

• The second real body should have the opposite color of the first real body.

• The second day's real body totally engulfs the first day's body.

Bullish EngulfingBullish Engulfing

Bullish EngulfingBullish Engulfing

• First day is a long white day. First day is a long white day.

• Second day gaps above the Second day gaps above the first day's close. first day's close.

• Third day is a long black day. Third day is a long black day.

Evening Star (Bearish)Evening Star (Bearish)

Evening Star (Bearish)Evening Star (Bearish)

• First day is a long white dayFirst day is a long white day

• Second day is black with an Second day is black with an open above the high of the open above the high of the previous dayprevious day

• Second day closes within but Second day closes within but below the midpoint of the first below the midpoint of the first day’s bodyday’s body

Dark Cloud Cover (Bearish)Dark Cloud Cover (Bearish)

Dark Cloud Cover (Bearish)Dark Cloud Cover (Bearish)

DivergencesDivergences

• Positive Divergence Positive Divergence • Occurs when the indicator Occurs when the indicator

moves higher at the same time moves higher at the same time the stock price is declining.the stock price is declining.

• Negative divergenceNegative divergence• Occurs when the indicator Occurs when the indicator

moves lower as the stock price moves lower as the stock price continues to rise.continues to rise.

A divergence occurs when the trend of a A divergence occurs when the trend of a security's price doesn't agree with the trend security's price doesn't agree with the trend of an indicator.of an indicator.

Chart PatternsChart Patterns

Reversal PatternsReversal Patterns• Head and ShouldersHead and Shoulders• Double Top (Bottom)Double Top (Bottom)

Continuation PatternsContinuation Patterns• FlagFlag

Head & ShouldersHead & Shoulders Consists of a peak followed Consists of a peak followed

by a higher peak and then a by a higher peak and then a lower peak with a break below lower peak with a break below the neckline. the neckline.

Volume ConfirmationVolume Confirmation• First peak - High volumeFirst peak - High volume• Middle peak - Moderate Middle peak - Moderate

volume volume • Third peak - Low Third peak - Low

volumevolume• A sharp increase in A sharp increase in

volume on the break volume on the break below the necklinebelow the neckline

Double TopDouble Top

Double Top

• Made up of two consecutive Made up of two consecutive peaks that are roughly equal, peaks that are roughly equal, with a moderate trough in with a moderate trough in between between

• Volume contracts on second Volume contracts on second peak as a further indication of peak as a further indication of weakening demand. weakening demand.

• Support must be broken in a Support must be broken in a convincing manner, and convincing manner, and usually with an expansion of usually with an expansion of volume volume

Flags (Continuation)Flags (Continuation)

• Mark a small consolidation Mark a small consolidation before the previous move before the previous move resumes. resumes.

• Volume confirmation:Volume confirmation:• Expands to form the flagpoleExpands to form the flagpole

• Contracts during the flag's Contracts during the flag's formationformation

• Expands after the resistance Expands after the resistance breakout.breakout.

• Usually the price target is Usually the price target is the length of the flagpolethe length of the flagpole

RatiosRatios Intermarket AnalysisIntermarket Analysis

• Intermarket Technical Analysis is the Intermarket Technical Analysis is the study of the relationships between the study of the relationships between the four major financial markets: Stocks, four major financial markets: Stocks, Bonds, Commodities and Currencies. Bonds, Commodities and Currencies.

• 30 Year US Bond / S&P 50030 Year US Bond / S&P 500• US$ Dollar / GoldUS$ Dollar / Gold

Links and Suggested Reading Links

• Stockcharts.com

• Prophet.net

• Hotcandlestick.com

• Equis.com

• Leavittbrothers.com

• Chartpatterns.com

Suggested ReadingSuggested Reading

• Japanese Candlestick Charting Techniques - Steven NisonJapanese Candlestick Charting Techniques - Steven Nison

• Beyond Candlesticks - Steven NisonBeyond Candlesticks - Steven Nison

• Technical Analysis of Stock Trends - Robert Edwards & John MageeTechnical Analysis of Stock Trends - Robert Edwards & John Magee

• Encyclopedia of Chart Patterns - Thomas N. BulkowskiEncyclopedia of Chart Patterns - Thomas N. Bulkowski

Andy Nogueira – andy_nogueira@sympatico.caAndy Nogueira – andy_nogueira@sympatico.ca