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More and more people are turning to the study of share market price charts in order to understand the likelihood of a share price: (a) increasing, (b) decreasing, or (c) staying stuck in a range. Especially with the markets turmoil of 2007+. Many people are disenchanted with their financial advisor, broker, or their investment bank.
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TechnicalAnalysis
TechnicalAnalysis?
What is it?October 2011
Rev 1.1a
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
monthly candle chart
pricebreakout
candlestickpatterns
chartpatterns
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TechnicalAnalysis
Disclaimer➔ CAUTION!!➔ This presentation contains NO advice.➔ It is for general education only.➔ Always consult a trained, trustworthy
professional before investing, to determine if your intended investment might suit your personal individual situation.
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What is Technical Analysis?TechnicalAnalysis
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
A definitionThe use of market data and
charting skills to anticipate market direction and timing
to make consistent profits.
The use of market data and charting skills to anticipate market
direction and timing to make consistent profits.
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What is Technical Analysis?TechnicalAnalysis
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
T.A. is: . . .1. Price charts and chart patterns2. Candle patterns3. Chart Indicators
● Moving Average, MACD, RSI, P-SAR, etc.4. Numeric analysis5. Specialist topics:
● Fibonacci, Elliott Wave, W.D.Gann6. Using charting software
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
The Weekly Line Chart
Weekly Chart:-Shows the Closing price at the end of each week.
The weekly Closing prices are joined together by straight lines.
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Up Trends
If only we could spot these trends
and take advantage.
If only we could spot these trends
and take advantage.
Could you have been tempted to buy this stock?
Up 81% in40 weeks.
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Down Trends
Would you be tempted to buy this stock?
(ps: it's Telstra)
Would you be tempted to buy this stock?
(ps: it's Telstra)
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Defining a trend● Identify the Peaks
and Troughs.
● Look for: Higher Peaks (HP) andHigher Troughs (HT)(or Higher Highs and Higher Lows).
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Trend = Higher Highs and LowsGet a feel for what the price is doing.
Identify trends (up, or down), ornon-trending.
Use indicators to help.
Terminology:-Higher High = Higher PeakHigher Low = Higher Trough
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Beware the down trend
Not a good idea to investin a down-trending stock,
until the trend has finished*.
Not a good idea to investin a down-trending stock,
until the trend has finished*.
* — Dow Theory* — Dow Theory
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Chart patterns
Base ConsolidationBase Consolidation
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Chart patterns
The BullishFalling Wedge chart pattern
The BullishFalling Wedge chart pattern
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Chart patterns
The Expanding Triangle (megaphone)chart pattern
The Expanding Triangle (megaphone)chart pattern
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
OHLC Bar and Candle...
Each bar on a bar chart, and
each candle on a candle chart
summarises the price action
in any one period(a day, week, month, etc.).
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Support and Resistance
Note: Sometimes a “fat pencil” is appropriate.
ResistanceResistanceSupport linesSupport lines
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Candle body and tails● Their presence or absence is important● Their length (ie. their height) is important.
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Candle patterns — small bodies● With or without a gap from previous candle.● Hanging Man (at tops)
● Shooting Star (2-candle pattern)
● Evening Star (3-candle pattern)
● Doji Star (2-candle pattern)
● Hammer (at bottoms)
● Morning Star (3-candle pattern)
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Patterns — engulfing and piercingReversal patterns in UP Trends:-● Engulfing Bearish — “outside day”
(2-candle pattern)
● Dark Cloud (2-candle pattern)
● Harami Bearish (2-candle pattern)
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TechnicalAnalysis Price Chart Basics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Patterns — engulfing and piercingReversal patterns in DOWN Trends:-● Piercing Line (2-candle pattern)
● Engulfing Bullish (2-candle pattern)
● Harami Bullish — “inside day”(2-candle pattern)
● Harami Cross (2-candle pattern)
. 20
TechnicalAnalysis Chart Indicators
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Moving Average (MA)● 21 day MA is the
average of all prices for the last 21 price bars*
● Can indicate a trend● Can be used to
interpret buy/sell signals. * - A “bar” - can be:
a daily bar on a daily chart,or a weekly bar
on a weekly chart, etc.or just each point on a line chart.
. 21
TechnicalAnalysis Chart Indicators
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Moving Average — how to calculate?
1 2 3 4 5 6 7 84
4.5
5
5.5
6
6.5
7
7.5
8
8.5
4
5
6
7
8 8
7
6
5
6
7
7.67 7.67
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Price3-period MA
Simple calculation of 3-period MA.The first MA value is the average of the first 3 price values:
(4+5+6)3
= 153
=5
. 22
TechnicalAnalysis Chart Indicators
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Bollinger BandsA top line,
average lineand bottom line.
A top line, average line
and bottom line.
Weekly candles
. 23
TechnicalAnalysis Chart Indicators
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Average True Range (ATR)Useful to understand the notion of ATR
ATR indicatorThis one shows the average variation in price over the
last 14 candles.
ATR indicatorThis one shows the average variation in price over the
last 14 candles.
Weekly candles
Applications, samples, strategiesTechnicalAnalysis
. 24
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Stop Loss? — under Support?
Initial Stop Loss positioncould be under recent
support and under recent price action.
Initial Stop Loss positioncould be under recent
support and under recent price action.
Down trend is broken
Down trend is broken
Applications, samples, strategiesTechnicalAnalysis
. 25
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Stop Loss — using ATRWilson ATR Trailing Stop indicator
ATR = Average True RangeThe stop is set at a multiple of ATR
Applications, samples, strategiesTechnicalAnalysis
. 26
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Sample Trading Strategies1. Find stocks using fundamental analysis and
time entry with technical analysis2. High dividend yield3. Long term bull market strategy, different to:4. Shorter term bull market strategy5. Different for a bear market.6. Momentum indicator + MA-of-Momentum
(see next slide)
Applications, samples, strategiesTechnicalAnalysis
. 27
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Sample Strategies
Momentum indicatorand
MA-of-Momentum
Momentum indicatorand
MA-of-Momentum
Applications, samples, strategiesTechnicalAnalysis
. 28
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Sample Strategies● Use ADX indicator for entry (Chuck le Beau)● Use Parabolic SAR for exits● Price Breakout
(see next slide)
Applications, samples, strategiesTechnicalAnalysis
. 29
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Price Break Out
Applications, samples, strategiesTechnicalAnalysis
. 30
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Moving Average Cross-over
Applications, samples, strategiesTechnicalAnalysis
. 31
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Some successful strategiesThese are in use by some successful traders:● Use the MACD and the RSI indicators.
Look for RSI divergence against the share price.
● Use Stochastic indicator and Directional Movement (ADX) to give joint signals.
Applications, samples, strategiesTechnicalAnalysis
. 32
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Some more strategiesNote: None of these can be guaranteed!!● Takeover target speculation● Momentum trading● Position trading● Swing trading● Dividend stripping● IPOs● Hedging
Applications, samples, strategiesTechnicalAnalysis
. 33
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Isn't this gambling?● Some people think that
share trading is just gambling?● Without a proper trading plan and
trading strategy then may be it is.● But if you have a proper, proven and tested
plan, then it is actually calculated risk taking.● Compare with other professions:
– farming, retail business, catering,– tourist trade, tradesman, handy man, etc.
Applications, samples, strategiesTechnicalAnalysis
. 34
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Trading — Final TipsWatch out for:● Use a stop loss!● Low liquidity● Watch diligently
(don't take your eyes off the ball)● Retracements● Sucker rallies● Profit takers● The 3-period pause in a rally
. 35
TechnicalAnalysis Specialised Topics
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Fibonacci Retracement
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TechnicalAnalysis Charting Software
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Use good charting software● If you use a basic charting tool, then the
information might be limited to the basics● Use a better tool for greater flexibility and more
informative results.
(in Australia — BullCharts)
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TechnicalAnalysis Charting Software
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Charting software – key features ● Data — Easy access to download data● Price charts in various time frames● Intraday data (optional)● Indicators – draw them on the chart● Watchlists – several lists of stocks to easily
keep an eye on● Scans – Specify selection criteria and scan the
data for stocks that match the criteria● Line studies and annotations on the chart
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What is Technical Analysis?TechnicalAnalysis
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
Technical Analysis is: . . .1. Price charts and chart patterns2. Candle patterns3. Chart Indicators
● Moving Average, MACD, RSI, P-SAR, etc.4. Numeric analysis5. Specialist topics:
● Fibonacci, Elliott Wave, W.D.Gann6. Using charting software
39
What is Technical Analysis?TechnicalAnalysis
© Copyright 2011, Robert B. Brain, Brainy's Share Market Toolbox — www.robertbrain.com
More details?
Refer to Brainy's Share Market Toolbox:
www.robertbrain.com for more information
This presentation:© Copyright, 2011, Robert Brain
All rights reserved.