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Technical Analysis 12

2013-12-06T20:09:00.000+07:00

Technical Analysis 12

Price channels

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Trend channel

A price channel is a pair of parallel trend lines that form a chart pattern for a stock or commodity.^[1] Channels may be horizontal, ascending or descending. When prices pass through and stay through a trendline representing support or resistance, the trend is said to be broken and there is a "breakout".^[2]

References[edit]

^ Murphy, pages 80-85
^ Murphy, pages 400-401

John J. Murphy, Technical Analysis of the Financial Markets, New York Institute of Finance, 1999, ISBN 0-7352-0066-1

Technical Analysis 20

2013-12-06T19:39:00.003+07:00

Morning star (candlestick pattern)

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This article does not cite any references or sources. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (July 2010)

Illustration of the morningstar pattern

The Morning Star is a pattern seen in a candlestick chart, a type of chart used by stock analysts to describe and predict price movements of a security, derivative, or currency over time.

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Description[edit]

The pattern is made up of three candles: normally a long bearish candle, followed by a short bullish or bearish doji, which is then followed by a long bullish candle. In order to have a valid Morning Star formation, most traders will look for the top of the third candle to be at least halfway up the body of the first candle in the pattern. Black candles indicate falling prices, and white candles indicate rising prices.

Interpretation[edit]

When found in a downtrend, this pattern can be an indication that a reversal in the price trend is going to take place. What the pattern represents from a supply and demand point of view is a lot of selling in the period which forms the first black candle; then, a period of lower trading but with a reduced range, which indicates indecision in the market; this forms the second candle. This is followed by a large white candle, representing buyers taking control of the market. As the Morning Star is a three-candle pattern, traders often will not wait for confirmation from a fourth candle before buying the stock. High volumes on the third trading day confirm the pattern. Traders will look at the size of the candles for an indication of the size of the potential reversal. The larger the white and black candle, and the higher the white candle moves in relation to the black candle, the larger the potential reversal.
The chart below illustrates.

The Morning Star pattern is circled. Note the high trading volumes on the third day.

The opposite occurring at the top of an uptrend is called an evening star.

External links[edit]

Morning Star at chartscorner.com

Technical Analysis 19

2013-12-06T19:38:00.002+07:00

Three Black Crows

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Three black crows is a term used by stock market analysts to describe a market downturn. It appears on a candlestick chart in the financial markets. It unfolds across three trading sessions, and consists of three long candlesticks that trend downward like a staircase. Each candle should open below the previous day's open, ideally in the middle price range of that previous day. Each candlestick should also close progressively downward to establish a new near-term low. The pattern indicates a strong price reversal from a bull market to a bear market.^[1]
The three black crows help to confirm that a bull market has ended and market sentiment has turned negative. In Japanese Candlestick Charting Techniques, technical analyst Steve Nison says "The three black crows would likely be useful for longer-term traders."^[2]
This candlestick pattern has a counterpart known as the Three white soldiers, whose attributes help identify a bullish reversal or market upswing.

References[edit]

^ "Stock market investing 101 - Simplified utilizing candlestick signals". Retrieved 16 June 2010.
^ Nison, Steve (2001). Candlestick Charting Explained (2nd ed.). Paramus, New Jersey: New York Institute of Finance. p. 97. ISBN 0-7352-0181-1.

Japanese Candlestick Charting Techniques by Steve Nison. Published by New York Institute of Finance. ISBN 0-7352-0181-1
Candlestick Charting Explained by Gregory L. Morris. Published by McGraw-Hill. ISBN 0-07-146154-X

External links[edit]

Technical Analysis 18

2013-12-06T19:37:00.002+07:00

Three white soldiers

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Three white soldiers is a candlestick chart pattern in the financial markets. It unfolds across three trading sessions and suggests a strong price reversal from a bear market to a bull market. The pattern consists of three long candlesticks that trend upward like a staircase; each should open above the previous day's open, ideally in the middle price range of that previous day. Each candlestick should also close progressively upward to establish a new near-term high.^[1]
The three white soldiers help to confirm that a bear market has ended and market sentiment has turned positive. In Candlestick Charting Explained, technical analyst Gregory L. Morris says "This type of price action is very bullish and should never be ignored."^[2]
This candlestick pattern has an opposite known as the Three Black Crows, which shares the same attributes in reverse.

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Notes[edit]

Jump up ^ "Japanese Candlesticks". Retrieved 15 June 2010.
Jump up ^ Morris, Gregory L.; Litchfield, Ryan (2005). Candlestick Charting Explained (3rd ed.). New York, NY: McGraw-Hill. p. 126. ISBN 0-07-146154-X.

References[edit]

Candlestick Charting Explained by Gregory L. Morris. Published by McGraw-Hill. ISBN 0-07-146154-X
Japanese Candlestick Charting Techniques by Steve Nison. Published by New York Institute of Finance. ISBN 0-7352-0181-1

External links[edit]

Technical Analysis 17

2013-12-06T19:36:00.001+07:00

Gap (chart pattern)

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Sequence of Gaps

A gap is defined as an unfilled space or interval. On a technical analysis chart, a gap represents an area where no trading takes place. On the Japanese candlestick chart, a window is interpreted as a gap.
In an upward trend, a gap is produced when the highest price of one day is lower than the lowest price of the following day. Thus, in a downward trend, a gap occurs when the lowest price of any one day is higher than the highest price of the next day.
For example, the price of a share reaches a high of $30.00 on Wednesday, and opens at $31.20 on Thursday, falls down to $31.00 in the early hour, moves straight up again to $31.45, and no trading occurs in between $30.00 and $31.00 area. This no-trading zone appears on the chart as a gap.
Gaps can play an important role when spotted before the beginning of a move.

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Types of gaps[edit]

There are four different types of gaps, excluding the gap that occurs as a result of a stock going ex-dividend. Since each type of gap has its own distinctive implication, it is very important to be able to distinguish between such gaps.

Breakway gap occurs when prices break away from an area of congestion. When the price is breaking away from a triangle (Ascending or Descending) with a gap then it can be implied that change in sentiment is strong and coming move will be powerful. One must keep an eye on the volume. If it is heavy after the gap is formed then there is a good chance that market does not return to fill the gap. When the price is breaking away on a low volume, there is a possibility that the gap will be filled before prices resume their trend.

Common gap is also known as area gap, pattern gap or temporary gap. They tend to occur when trading is bound between support and resistance level on a short span of time and market price is moving sideways. One can also see them in price congestion area. Usually, the price moves back or goes up in order to fill the gaps in the coming days. If the gap is filled, then they offer little in the way of forecasting significance.

Exhaustion gap signals end of a move. These gaps are associated with a rapid, straight-line advance or decline. A reversal day can easily help to differentiate between the Measuring gap and the Exhaustion gap. When it is formed at the top with heavy volume, there is significant chance that the market is exhausted and prevailing trend is at halt which is ordinarily followed by some other area pattern development. An Exhaustion gap should not be read as a major reversal.

Measuring Gap is also known as a runaway gap. A measuring gap is formed usually in the half way of a price move. It is not associated with the congestion area, it is more likely to occur approximately in the middle of rapid advance or decline. It can be used to measure roughly how much further ahead a move will go. Runaway gaps are not normally filled for a considerable period of time.

Caution[edit]

It is quite possible that confusion between measuring gap and exhaustion gap can cause an investor to position himself incorrectly and to miss significant gains during the last half of a major uptrend. Keeping an eye on the volume can help to find the clue between measuring gap and exhaustion gap. Normally, noticeable heavy volume accompanies the arrival of exhaustion gap.

Trading gaps for profit[edit]

Some market speculators "Fade" the gap on the opening of a market. This means for example that if the S&P 500 closed the day before at 1150 (16:15 EST) and opens today at 1160 (09:30 EST), they will short the market expecting this "upgap" to close. A "downgap" would mean today opens at for example 1140, and the speculator buys the market at the open expecting the "downgap to close". The probability of this happening on any given day is around 70%, depending on which market you look at. Once the probability of "gap fill" on any given day or technical position is established, then the best setups for this trade can be identified. Some days have such a low probability of the gap filling that speculators will trade in the direction of the gap.

Examples[edit]

Measuring gap

Exhaustion gap^[1]

Common gaps^[2]

Breakaway gap^[3]

References[edit]

External links[edit]

Gap Video; all referenced sources
Analyzing Chart Patterns: Gaps at investopedia.com
Playing The Gap at investopedia.com
Windows (Gaps) at onlinetradingconcepts.com

Technical Analysis 16

2013-12-06T19:35:00.002+07:00

Island reversal

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This article provides insufficient context for those unfamiliar with the subject. Please help improve the article with a good introductory style. (July 2011)

The Island Reversals

In general terms, island reversal can be defined as a compact trading activity within a range of prices, separated from the move proceeding it; this separation is caused by an exhaustion gap and the subsequent move in the opposite direction occurs as a result of a breakaway gap.

Formation[edit]

This section does not cite any references or sources. Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. (July 2011)

Close scrutiny of island reversal formations shows that the island reversal consists of an exhaustion gap and the subsequent move is followed by a breakaway gap. Uncommonly, the breakaway gap that completes the island is filled in a few days by a pull back as a result of the reaction. The island reversal can occur also, inversely, at the peak or the reverse of head and shoulders formations.
For example, assume that the price in a rising trend closes at its high of $84.00 and opens at $86.00 the following day and then does not fall below its opening. Near the end of the day, it moves up further and touches $88.00 but closes at $87.60 however. Observation thus shows a gap of $2.00 which is not filled. On the following day market price open at $87.40, touches high of $88.90 and closes at $87.00. A few days later or the very next day, market price opens at $84.00 and closes at $82.90, keeping itself below the area of $86.00 and $84.00. All the trading above $86.00 will appear on the technical analysis chart to be isolated and is known as, an island reversal.

Characteristics[edit]

This section does not cite any references or sources. Please help improve this section by adding citations to reliable sources. Unsourced material may be challenged and removed. (July 2011)

The occurrence of an island reversal is rather rare.^{[citation needed]}
It consists of a minor move.
It is not, in itself of major significance.
It can occur at the top as well as at the bottom.
The gaps at either end occur at almost the same price level.
It has a compact trading activity that is separated from the subsequent move which is in the opposite direction.
It is an extremely good indicator of a reversal of primary or intermediate trend.
As soon as it appears, it indicates that an extreme change in the sentiment has occurred.
High volume is expected in that compact trading area.
The trading activity may last for only a single day or a couple of days. When this arrangement occurs for only a single day, it is known as "one day reversal".

Technical Analysis 15

2013-12-06T19:34:00.003+07:00

Flag and pennant patterns

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The flag and pennant patterns are commonly found patterns in the price charts of financially traded assets (stocks, bonds, futures, etc.). The patterns are characterized by a clear direction of the price trend, followed by a consolidation and rangebound movement, which is then followed by a resumption of the trend.

Flag pattern[edit]

The flag pattern is encompassed by two parallel lines. These lines can be either flat or pointed in the opposite direction of the primary market trend. The pole is then formed by a line which represents the primary trend in the market. The pattern is seen as the market potentially just taking a “breather” after a big move before continuing its primary trend. The chart below illustrates.

Pennant pattern[edit]

The pennant pattern is identical to the flag pattern in its setup and implications; the only difference is that the consolidation phase of a pennant pattern is characterized by converging trendlines rather than parallel trendlines. The image below illustrates.

External links[edit]

Technical Analysis 14

2013-12-06T19:32:00.003+07:00

Technical Analysis 14

Triangle (chart pattern)

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This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. (July 2010)

Triangles are a commonly found in the price charts of financially traded assets (stocks, bonds, futures, etc.). The pattern derives its name from the fact that it is characterized by a contraction in price range and converging trendlines, thus giving it a triangular shape.
Triangle Patterns can be broken down into three categories: the ascending triangle, the descending triangle, and the symmetrical triangle. While the shape of the triangle is significant, of more importance is the direction that the market moves when it breaks out of the triangle. Lastly, while triangles can sometimes be reversal patterns—meaning a reversal of the prior trend—they are normally seen as continuation patterns (meaning a continuation of the prior trend).

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The ascending triangle[edit]

The ascending triangle is formed when the market makes higher lows and the same level highs. These patterns are normally seen in an uptrend and viewed as a continuation pattern as buying demand gain more and more control, running up to the top resistance line of the pattern. While you normally will see this pattern form in an uptrend, if you do see it in a downtrend it should be paid attention to as it can act as a powerful reversal signal.
The chart below offers an example of an descending triangle.

The descending triangle[edit]

The descending triangle is formed when the market makes lower highs and the same level lows. These patterns are normally seen in a downtrend and viewed as a continuation pattern as the bears gain more and more control running down to the bottom support line of the pattern. While you normally will see this pattern form in a downtrend, if you do see it in an uptrend it should be paid attention to as it can act as a powerful reversal signal.
The image below illustrates.

The symmetrical triangle[edit]

The symmetrical triangle is formed when the market makes lower highs and higher lows and is commonly associated with directionless markets as the contraction of the market range indicates that neither the bulls nor the bears are in control. If this pattern forms in an uptrend then it is considered a continuation pattern if the market breaks out to the upside and a reversal pattern if the market breaks to the downside. Similarly if the pattern forms in a downtrend it is considered a continuation pattern if the market breaks out to the downside and a reversal pattern if the market breaks to the upside.
The image below illustrates.

External links[edit]

Video of Triangle Pattern with breakout direction and gain/decline statistics all fully sourced content

Technical Analysis 13

2013-12-06T19:31:00.002+07:00

Technical Analysis 13

Wedge pattern

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The wedge pattern is a commonly found pattern in the price charts of financially traded assets (stocks, bonds, futures, etc.). The pattern is characterized by a contracting range in prices coupled with an upward trend in prices (known as a rising wedge) or a downward trend in prices (known as a falling wedge).
A wedge pattern is considered to be a pattern which is forming at the top or bottom of the trend. It is a type of formation in which trading activities are confined within converging straight lines which form a pattern. It should take about 3 to 4 weeks to complete the wedge. This pattern has a rising or falling slant pointing in the same direction. It differs from the triangle in the sense that both boundary lines either slope up or down. Price breaking out point creates another difference from the triangle. Falling and rising wedges are a small part of intermediate or major trend. As they are reserved for minor trends, they are not considered to be major patterns. Once that basic or primary trend resumes itself, the wedge pattern loses its effectiveness as a technical indicator.

Falling wedge[edit]

Falling wedge

The falling wedge pattern is characterized by a chart pattern which forms when the market makes lower lows and lower highs with a contracting range. When this pattern is found in a downward trend, it is considered a reversal pattern, as the contraction of the range indicates the downtrend is losing steam. When this pattern is found in an uptrend, it is considered a bullish pattern, as the market range becomes narrower into the correction, indicating that the downward trend is losing strength and the resumption of the uptrend is in the making.
In a falling wedge, both boundary lines slant down from left to right. The upper descends at a steeper angle than the lower line. Volume keeps on diminishing and trading activity slows down due to narrowing prices. There comes the breaking point, and trading activity after the breakout differs. Once prices move out of the specific boundary lines of a falling wedge, they are more likely to move sideways and saucer-out before they resume the basic trend.

Rising wedge[edit]

Rising wedge

The rising wedge pattern is characterized by a chart pattern which forms when the market makes higher highs and higher lows with a contracting range. When this pattern is found in an uptrend, it is considered a reversal pattern, as the contraction of the range indicates that the uptrend is losing strength. When this pattern is found in a downtrend, it is considered a bearish pattern, as the market range becomes narrower into the correction, indicating that the correction is losing strength, and that the resumption of the downtrend is in the making.
In a rising wedge, both boundary lines slant up from left to right. Although both lines point in the same direction, the lower line rises at a steeper angle then the upper one. Prices usually decline after breaking through the lower boundary line. As far as volumes are concerned, they keep on declining with each new price advance or wave up, indicating that the demand is weakening at the higher price level. A rising wedge is more reliable when found in a bearish market. In a bullish trend what seems to be a Rising Wedge may actually be a Flag or a Pennant (stepbrother of a wedge) requiring about 4 weeks to complete.

External links[edit]

How To Trade Wedges at investopedia.com
Analyzing Chart Patterns: The Wedge at investopedia.com

Technical Analysis 11

2013-12-06T19:28:00.001+07:00

Technical Analysis 11

Broadening top

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Broadening top is technical analysis chart pattern describing trends of stocks, commodities, currencies, and other assets.

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Point of formation[edit]

Broadening Top formation appears much more frequently at tops than at bottoms. It is a difficult formation to trade in. Its formation usually has bearish implications.

Role of big players[edit]

It is a common saying that smart money is out of market in such formation and market is out of control. In its formation, most of the selling is completed in the early stage by big players and the participation is from general public in the later stage.

Price and volume[edit]

Price keeps on swinging unpredictably and one can't be sure where the next swing will end. Regarding the shares volume, it is very irregular and leaves no clue to the direction of the next move.

How broadening top is formed[edit]

In the broadening top formation five minor reversals are followed by a substantial decline.

Five minor reversals a-b-c-d-e

In the figure above, price of the share reverses five times, reversal point d is made at a lower point than reversal point b and reversal point c and e occur successively higher than reversal point a.
One can't be sure of the trend unless price breaks down the lower of the two points (b & d) and keeps on falling. In the figure below, Broading Top is confirmed.

Broadening Top confirmation

Other chart patterns[edit]

[hide] v t e

Technical Analysis 10

2013-12-06T19:19:00.001+07:00

Technical Analysis 10

Triple top and triple bottom

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Triple top and triple bottom are reversal chart patterns used in the technical analysis of stocks, commodites, currencies, and other assets.

Triple top[edit]

Triple top confirmation

Formation
The formation of triple tops is rarer than that of double tops in the rising market trend. The volume is usually low during the second rally up and lesser during the formation of the third top. The peaks may not necessarily be spaced evenly like those which constitute a Double top. The intervening valleys may not bottom out at exactly the same level, i.e. either the first or second may be lower. The triple top is confirmed when the price decline from the third top falls below the bottom of the lowest valley between the three peaks.
Selling strategy

Opportunity

There are several different trading strategies that can be employed to take advantage of this formation. Of course, first and second peaks are perfect point to place sell orders. After the double top has been confirmed and if prices are moving up again with low volume, it is an opportune point to sell. One can sell short with a stop (calculated loss) above the highest peak of the Double top. The next opportune point to sell would be after a Triple top has formed and a fourth top is being formed at the lower level.
Notes Observation shows that it is rare to see four tops or bottoms at equal levels. In case prices continue to rally up to the level of the three previous tops, there is a good chance that they will rally up higher. If they come down to the same level a fourth time, they usually decline.

Triple bottom[edit]

Triple bottom

Most of the rules that are applied in the formation of the triple top can be reversed in the formation of triple bottom. As far as volume is concerned, the third low bottom should be on low volume and the rally up from that bottom should show a marked increase in activity.
The formation of Triple bottom occurs during the period of accumulation.

External links[edit]

Triple Bottom Video with Statistics and Price Targets
Analyzing Chart Patterns: Triple Tops And Bottoms at investopedia.com
How to Trade the Double Bottom Pattern at StockChartPatterns.org

Technical Analysis 9

2013-12-06T19:16:00.001+07:00

Technical Analysis 9

Double top and double bottom

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Double top and double bottom are reversal chart patterns observed in the technical analysis of financial trading markets of stocks, commodities, currencies, and other assets.

Double top[edit]

Double top confirmation

The double top is a frequent price formation at the end of a bull market. It appears as two consecutive peaks of approximately the same price on a price-versus-time chart of a market. The two peaks are separated by a minimum in price, a valley. The price level of this minimum is called the neck line of the formation. The formation is completed and confirmed when the price falls below the neck line, indicating that further price decline is imminent or highly likely.
The double top pattern shows that demand is outpacing supply (buyers predominate) up to the first top, causing prices to rise. The supply-demand balance then reverses; supply outpaces demand (sellers predominate), causing prices to fall. After a price valley, buyers again predominate and prices rise. If traders see that prices are not pushing past their level at the first top, sellers may again prevail, lowering prices and causing a double top to form. It is generally regarded as a bearish signal if prices drop below the neck line.
The time between the two peaks is also a determining factor for the existence of a double top pattern. If the tops appear at the same level but are very close in time, then the probability is high that they are part of the consolidation and the trend will resume.
Volume is another indicator for interpreting this formation. Price reaches the first peak on increased volume then falls down the valley with low volume. Another attempt on the rally up to the second peak should be on a lower volume.

Double bottom[edit]

Double bottom confirmation

A double bottom is the end formation in a declining market. It is identical to the double top, except for the inverse relationship in price. The pattern is formed by two price minima separated by local peak defining the neck line. The formation is completed and confirmed when the price rises above the neck line, indicating that further price rise is imminent or highly likely.
Most of the rules that are associated with double top formation also apply to the double bottom pattern.
Volume should show a marked increase on the rally up while prices are flat at the second bottom.^{[citation needed]}

External links[edit]

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2013-11-29T19:51:00.001+07:00

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2013-11-27T23:16:00.000+07:00

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Technical Analysis 8

2013-11-25T20:05:00.000+07:00

Technical Analysis 8

Head and shoulders (chart pattern)

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On the technical analysis chart, the Head and shoulders formation occurs when a price trend is in the process of reversal either from a bullish or bearish trend; a characteristic pattern takes shape and is recognized as reversal formation.

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Head and shoulders top[edit]

Head and Shoulders Top

Head and Shoulders formation consists of a left shoulder, a head, and a right shoulder and a line drawn as the neckline. The left shoulder is formed at the end of an extensive move during which volume is noticeably high. After the peak of the left shoulder is formed, there is a subsequent reaction and prices slide down to a certain extent which generally occurs on low volume. The prices rally up to form the head with normal or heavy volume and subsequent reaction downward is accompanied with lesser volume. The right shoulder is formed when prices move up again but remain below the central peak called the Head and fall down nearly equal to the first valley between the left shoulder and the head or at least below the peak of the left shoulder. Volume is lesser in the right shoulder formation compared to the left shoulder and the head formation. A neckline is drawn across the bottoms of the left shoulder, the head and the right shoulder. When prices break through this neckline and keep on falling after forming the right shoulder, it is the ultimate confirmation of the completion of the Head and Shoulders Top formation. It is quite possible that prices pull back to touch the neckline before continuing their declining trend.^{[citation needed]}

Head and shoulders bottom[edit]

Head and Shoulders Bottom

This formation is simply the inverse of a Head and Shoulders Top and often indicates a change in the trend and the sentiment. The formation is upside down in which volume pattern is different than a Head and Shoulder Top. Prices move up from first low with increase volume up to a level to complete the left shoulder formation and then falls down to a new low. It follows by a recovery move that is marked by somewhat more volume than seen before to complete the head formation. A corrective reaction on low volume occurs to start formation of the right shoulder and then a sharp move up that must be on quite heavy volume breaks though the neckline.
Another difference between the Head and Shoulders Top and Bottom is that the Top Formations are completed in a few weeks, whereas a Major Bottom (Left, right shoulder or the head) usually takes a longer, and as observed, may prolong for a period of several months or sometimes more than a year.

Importance of neckline[edit]

The drawn neckline of the pattern represents a support level, and assumption cannot be taken that the Head and Shoulder formation is completed unless it is broken and such breakthrough may happen to be on more volume or may not be. The breakthrough should not be observed carelessly. A serious situation can occur if such a break is more than three to four percent.
When a stock drifts through the neckline on small volume, there may be a wave up, although it is not certain, but it is observed, the rally normally does not cross the general level of the Neckline and before selling pressure increases, the steep decline occurs and prices tumble with greater volume.

Characteristics[edit]

Most of the time Head and Shoulders are not perfectly shaped. This formation is slightly tilted upward or downward.
One shoulder may appear to droop.
On many chart patterns, any one of the two shoulders may appear broader than the other which is caused by the time involved in the formation of the valleys.
The neckline may not be perfectly horizontal; it may be ascending or descending.
If the neckline is ascending then the only qualification of the formation lies in the fact that the lowest point of the right shoulder must be noticeably lower than the peak of the left shoulder.

Usage as a tool[edit]

Head and Shoulders is an extremely useful tool after its confirmation to estimate and measure the minimum probable extent of the subsequent move from the neckline. To find the distance of subsequent move, measure the vertical distance from the peak of the head to the neckline. Then measure this same distance down from the neckline beginning at the point where prices penetrate the neckline after the completion of the right shoulder. This gives the minimum objective of how far prices can decline after the completion of this top formation.
If the price advance preceding the Head and Shoulders top is not long, the subsequent price fall after its completion may be small as well.

Complex head and shoulders[edit]

Further information: Double top and double bottom and Triple top and triple bottom

This type of Head and Shoulders pattern has more than one left and/or right shoulders and/or head. It is also known as Multiple Head and Shoulders pattern.

External links[edit]

Head and Shoulders Video of pattern, breakout, average expected decline from sell signal; all information has cited sources.
Head and shoulders at onlinetradingconcepts.com
Head and Shoulders Reversal Pattern at stockresearch.co.in
Analyzing Chart Patterns: Head And Shoulders at investopedia.com

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Kagi chart

Patterns

Chart

Head and shoulders

Cup and handle

Double top and double bottom

Triple top and triple bottom

Broadening top

Price channels

Wedge pattern

Triangle

Flag and pennant

Island reversal

Candlestick

Simple	Doji Hammer Hanging man Inverted hammer Shooting star Marubozu Spinning top

Complex	Three white soldiers Three Black Crows Morning star Hikkake pattern

Indicators

Trend	Average directional index (ADX) Ichimoku Kinkō Hyō Moving average convergence/divergence (MACD) Mass index Moving average (MA) Parabolic SAR (SAR) Smart money index (SMI) Trix Vortex Indicator (VI) Know sure thing oscillator (KST)

Momentum	Relative strength index (RSI) Stochastic oscillator True strength index (TSI) Williams %R (%R)

Volume	Accumulation/Distribution index Money flow index (MFI) On-balance volume (OBV) Volume–price trend (VPT) Force index (FI) Negative volume index (NVI) Ease of movement Put/call ratio (PCR)

Volatility	Average true range (ATR) Bollinger Bands (BB) Donchian channel Standard deviation (σ)

Other	Advance–decline line (ADL) Arms index (TRIN) Commodity channel index (CCI) Coppock curve Keltner channel McClellan oscillator Ulcer Index Ultimate oscillator

Retrieved from "http://en.wikipedia.org/w/index.php?title=Head_and_shoulders_(chart_pattern)&oldid=564320520"

Categories:

Chart patterns

Technical Analysis 7

2013-11-25T20:02:00.000+07:00

Technical Analysis 7

Trend line (technical analysis)

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A trend line is formed when a diagonal line can be drawn between two or more price pivot points. They are commonly used to judge entry and exit investment timing when trading securities.^[1] It can also be referred to as a dutch line as it was first used in Holland.
A trend line is a bounding line for the price movement of a security. A support trend line is formed when a securities price decreases and then rebounds at a pivot point that aligns with at least two previous support pivot points. Similarly a resistance trend line is formed when a securities price increases and then rebounds at a pivot point that aligns with at least two previous resistance pivot points. Stock often begin or end trending because of a stock catalyst such as a product launch or change in management.

Trend lines on a price chart.

Trend lines are a simple and widely used technical analysis approach to judging entry and exit investment timing. To establish a trend line historical data, typically presented in the format of a chart such as the above price chart, is required. Historically, trend lines have been drawn by hand on paper charts, but it is now more common to use charting software that enables trend lines to be drawn on computer based charts. There are some charting software that will automatically generate trend lines, however most traders prefer to draw their own trend lines.
When establishing trend lines it is important to choose a chart based on a price interval period that aligns with your trading strategy. Short term traders tend to use charts based on interval periods, such as 1 minute (i.e. the price of the security is plotted on the chart every 1 minute), with longer term traders using price charts based on hourly, daily, weekly and monthly interval periods.
However, time periods can also be viewed in terms of years. For example, below is a chart of the S&P 500 since the earliest data point until April 2008. While the Oracle example above uses a linear scale of price changes, long term data is more often viewed as logarithmic: e.g. the changes are really an attempt to approximate percentage changes than pure numerical value.

Previous chart from 1950 to about 1990, showing how linear scale obscures details by compressing the data.

Trend lines are typically used with price charts, however they can also be used with a range of technical analysis charts such as MACD and RSI. Trend lines can be used to identify positive and negative trending charts, whereby a positive trending chart forms an upsloping line when the support and the resistance pivots points are aligned, and a negative trending chart forms a downsloping line when the support and resistance pivot points are aligned.
Trend lines are used in many ways by traders. If a stock price is moving between support and resistance trend lines, then a basic investment strategy commonly used by traders, is to buy a stock at support and sell at resistance, then short at resistance and cover the short at support. The logic behind this, is that when the price returns to an existing principal trend line it may be an opportunity to open new positions in the direction of the trend, in the belief that the trend line will hold and the trend will continue further. A second way is that when price action breaks through the principal trend line of an existing trend, it is evidence that the trend may be going to fail, and a trader may consider trading in the opposite direction to the existing trend, or exiting positions in the direction of the trend.

References[edit]

^ Edwards, Robert D.; Magee, John (1948). "14". Technical Analysis of Stock Trends. Springfield, MA, USA: Stock Trend Service. p. 505. ISBN 1-880408-00-7.

[hide]

Technical analysis

Concepts

Support and resistance

Pivot point

Trend line

Breakout

Market trend

Dead cat bounce

Dow theory

Elliott wave principle

Fibonacci retracements

Gann theory

Charts

Candlestick chart

OHLC chart

Line chart

Point and figure chart

Kagi chart

Patterns

Chart

Head and shoulders

Cup and handle

Double top and double bottom

Triple top and triple bottom

Broadening top

Price channels

Wedge pattern

Triangle

Flag and pennant

Island reversal

Candlestick

Simple	Doji Hammer Hanging man Inverted hammer Shooting star Marubozu Spinning top

Complex	Three white soldiers Three Black Crows Morning star Hikkake pattern

Indicators

Trend	Average directional index (ADX) Ichimoku Kinkō Hyō Moving average convergence/divergence (MACD) Mass index Moving average (MA) Parabolic SAR (SAR) Smart money index (SMI) Trix Vortex Indicator (VI) Know sure thing oscillator (KST)

Momentum	Relative strength index (RSI) Stochastic oscillator True strength index (TSI) Williams %R (%R)

Volume	Accumulation/Distribution index Money flow index (MFI) On-balance volume (OBV) Volume–price trend (VPT) Force index (FI) Negative volume index (NVI) Ease of movement Put/call ratio (PCR)

Volatility	Average true range (ATR) Bollinger Bands (BB) Donchian channel Standard deviation (σ)

Other	Advance–decline line (ADL) Arms index (TRIN) Commodity channel index (CCI) Coppock curve Keltner channel McClellan oscillator Ulcer Index Ultimate oscillator

Retrieved from "http://en.wikipedia.org/w/index.php?title=Trend_line_(technical_analysis)&oldid=581050789"

Categories:

Chart overlays

Technical Analysis 6

2013-11-24T22:33:00.004+07:00

Technical Analysis 6

Charting terms and indicators[edit]

Concepts[edit]

Average true range – averaged daily trading range, adjusted for price gaps
Breakout – the concept whereby prices forcefully penetrate an area of prior support or resistance, usually, but not always, accompanied by an increase in volume.
Chart pattern – distinctive pattern created by the movement of security prices on a chart
Cycles – time targets for potential change in price action (price only moves up, down, or sideways)
Dead cat bounce – the phenomenon whereby a spectacular decline in the price of a stock is immediately followed by a moderate and temporary rise before resuming its downward movement
Elliott wave principle and the golden ratio to calculate successive price movements and retracements
Fibonacci ratios – used as a guide to determine support and resistance
Momentum – the rate of price change
Point and figure analysis – A priced-based analytical approach employing numerical filters which may incorporate time references, though ignores time entirely in its construction
Resistance – a price level that may prompt a net increase of selling activity
Support – a price level that may prompt a net increase of buying activity
Trending – the phenomenon by which price movement tends to persist in one direction for an extended period of time

Types of charts[edit]

Candlestick chart – Of Japanese origin and similar to OHLC, candlesticks widen and fill the interval between the open and close prices to emphasize the open/close relationship. In the West, often black or red candle bodies represent a close lower than the open, while white, green or blue candles represent a close higher than the open price.
Line chart – Connects the closing price values with line segments.
Open-high-low-close chart – OHLC charts, also known as bar charts, plot the span between the high and low prices of a trading period as a vertical line segment at the trading time, and the open and close prices with horizontal tick marks on the range line, usually a tick to the left for the open price and a tick to the right for the closing price.
Point and figure chart – a chart type employing numerical filters with only passing references to time, and which ignores time entirely in its construction.

Overlays[edit]

Overlays are generally superimposed over the main price chart.

Bollinger bands – a range of price volatility
Channel – a pair of parallel trend lines
Ichimoku kinko hyo – a moving average-based system that factors in time and the average point between a candle's high and low
Moving average – the last n-bars of price divided by "n"—where "n" is the number of bars specified by the length of the average. A moving average can be thought of as a kind of dynamic trend-line.
Parabolic SAR – Wilder's trailing stop based on prices tending to stay within a parabolic curve during a strong trend
Pivot point – derived by calculating the numerical average of a particular currency's or stock's high, low and closing prices
Resistance – a price level that may act as a ceiling above price
Support – a price level that may act as a floor below price
Trend line – a sloping line described by at least two peaks or two troughs

Breadth Indicators[edit]

These indicators are based on statistics derived from the broad market

Advance–decline line – a popular indicator of market breadth
McClellan Oscillator - a popular closed-form indicator of breadth
McClellan Summation Index - a popular open-form indicator of breadth

Price-based indicators[edit]

These indicators are generally shown below or above the main price chart.

%C – denotes current market environment as range expansion or a range contraction, it also forecast when extremes in trend or choppiness are being reached, so the trader can expect change.
Average directional index – a widely used indicator of trend strength
Commodity Channel Index – identifies cyclical trends
MACD – moving average convergence/divergence
Momentum – the rate of price change
Relative strength index (RSI) – oscillator showing price strength
Relative Vigor Index (RVI) – oscillator measures the conviction of a recent price action and the likelihood that it will continue
Stochastic oscillator – close position within recent trading range
Trix – an oscillator showing the slope of a triple-smoothed exponential moving average

Volume-based indicators[edit]

Accumulation/distribution index – based on the close within the day's range
Money Flow – the amount of stock traded on days the price went up
On-balance volume – the momentum of buying and selling stocks

Notes[edit]

Constructs such as ibid., loc. cit. and idem are discouraged by Wikipedia's style guide for footnotes, as they are easily broken. Please improve this article by replacing them with named references (quick guide), or an abbreviated title. (January 2013)

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Jump up ^ Frankel, J.A.; Froot, K.A. (1990). "Chartists, Fundamentalists, and Trading in the Foreign Exchange Market". The American Economic Review 80 (2): 181–185. JSTOR 2006566.
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^ Jump up to: ^a ^b Kahn, Michael N. (2006). Technical Analysis Plain and Simple: Charting the Markets in Your Language, Financial Times Press, Upper Saddle River, New Jersey, p. 80. ISBN 0-13-134597-4.
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Jump up ^ David Keller, "Breakthroughs in Technical Analysis; New Thinking from the World's Top Minds," New York, Bloomberg Press, 2007, ISBN 978-1-57660-242-3 pp.1-19
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Technical Analysis 5

2013-11-24T22:32:00.001+07:00

Technical Analysis 5

Empirical evidence[edit]

Whether technical analysis actually works is a matter of controversy. Methods vary greatly, and different technical analysts can sometimes make contradictory predictions from the same data. Many investors claim that they experience positive returns, but academic appraisals often find that it has little predictive power.^[51] Of 95 modern studies, 56 concluded that technical analysis had positive results, although data-snooping bias and other problems make the analysis difficult.^[13] Nonlinear prediction using neural networks occasionally produces statistically significant prediction results.^[52] A Federal Reserve working paper^[21] regarding support and resistance levels in short-term foreign exchange rates "offers strong evidence that the levels help to predict intraday trend interruptions," although the "predictive power" of those levels was "found to vary across the exchange rates and firms examined".
Technical trading strategies were found to be effective in the Chinese marketplace by a recent study that states, "Finally, we find significant positive returns on buy trades generated by the contrarian version of the moving-average crossover rule, the channel breakout rule, and the Bollinger band trading rule, after accounting for transaction costs of 0.50 percent."^[53]
An influential 1992 study by Brock et al. which appeared to find support for technical trading rules was tested for data snooping and other problems in 1999;^[54] the sample covered by Brock et al. was robust to data snooping.
Subsequently, a comprehensive study of the question by Amsterdam economist Gerwin Griffioen concludes that: "for the U.S., Japanese and most Western European stock market indices the recursive out-of-sample forecasting procedure does not show to be profitable, after implementing little transaction costs. Moreover, for sufficiently high transaction costs it is found, by estimating CAPMs, that technical trading shows no statistically significant risk-corrected out-of-sample forecasting power for almost all of the stock market indices."^[16] Transaction costs are particularly applicable to "momentum strategies"; a comprehensive 1996 review of the data and studies concluded that even small transaction costs would lead to an inability to capture any excess from such strategies.^[55]
In a paper published in the Journal of Finance, Dr. Andrew W. Lo, director MIT Laboratory for Financial Engineering, working with Harry Mamaysky and Jiang Wang found that "

Technical analysis, also known as "charting," has been a part of financial practice for many decades, but this discipline has not received the same level of academic scrutiny and acceptance as more traditional approaches such as fundamental analysis. One of the main obstacles is the highly subjective nature of technical analysis – the presence of geometric shapes in historical price charts is often in the eyes of the beholder. In this paper, we propose a systematic and automatic approach to technical pattern recognition using nonparametric kernel regression, and apply this method to a large number of U.S. stocks from 1962 to 1996 to evaluate the effectiveness of technical analysis. By comparing the unconditional empirical distribution of daily stock returns to the conditional distribution – conditioned on specific technical indicators such as head-and-shoulders or double-bottoms – we find that over the 31-year sample period, several technical indicators do provide incremental information and may have some practical value.^[56]

In that same paper Dr. Lo wrote that "several academic studies suggest that ... technical analysis may well be an effective means for extracting useful information from market prices."^[57] Some techniques such as Drummond Geometry attempt to overcome the past data bias by projecting support and resistance levels from differing time frames into the near-term future and combining that with reversion to the mean techniques.^[58]

Efficient market hypothesis[edit]

The efficient-market hypothesis (EMH) contradicts the basic tenets of technical analysis by stating that past prices cannot be used to profitably predict future prices. Thus it holds that technical analysis cannot be effective. Economist Eugene Fama published the seminal paper on the EMH in the Journal of Finance in 1970, and said "In short, the evidence in support of the efficient markets model is extensive, and (somewhat uniquely in economics) contradictory evidence is sparse."^[59]
Technicians say^[who?] that EMH ignores the way markets work, in that many investors base their expectations on past earnings or track record, for example. Because future stock prices can be strongly influenced by investor expectations, technicians claim it only follows that past prices influence future prices.^[60] They also point to research in the field of behavioral finance, specifically that people are not the rational participants EMH makes them out to be. Technicians have long said that irrational human behavior influences stock prices, and that this behavior leads to predictable outcomes.^[61] Author David Aronson says that the theory of behavioral finance blends with the practice of technical analysis:

By considering the impact of emotions, cognitive errors, irrational preferences, and the dynamics of group behavior, behavioral finance offers succinct explanations of excess market volatility as well as the excess returns earned by stale information strategies.... cognitive errors may also explain the existence of market inefficiencies that spawn the systematic price movements that allow objective TA [technical analysis] methods to work.^[60]

EMH advocates reply that while individual market participants do not always act rationally (or have complete information), their aggregate decisions balance each other, resulting in a rational outcome (optimists who buy stock and bid the price higher are countered by pessimists who sell their stock, which keeps the price in equilibrium).^[62] Likewise, complete information is reflected in the price because all market participants bring their own individual, but incomplete, knowledge together in the market.^[62]

Random walk hypothesis[edit]

The random walk hypothesis may be derived from the weak-form efficient markets hypothesis, which is based on the assumption that market participants take full account of any information contained in past price movements (but not necessarily other public information). In his book A Random Walk Down Wall Street, Princeton economist Burton Malkiel said that technical forecasting tools such as pattern analysis must ultimately be self-defeating: "The problem is that once such a regularity is known to market participants, people will act in such a way that prevents it from happening in the future."^[63] Malkiel has stated that while momentum may explain some stock price movements, there is not enough momentum to make excess profits. Malkiel has compared technical analysis to "astrology".^[64]
In the late 1980s, professors Andrew Lo and Craig McKinlay published a paper which cast doubt on the random walk hypothesis. In a 1999 response to Malkiel, Lo and McKinlay collected empirical papers that questioned the hypothesis' applicability^[65] that suggested a non-random and possibly predictive component to stock price movement, though they were careful to point out that rejecting random walk does not necessarily invalidate EMH, which is an entirely separate concept from RWH. In a 2000 paper, Andrew Lo back-analyzed data from U.S. from 1962 to 1996 and found that "several technical indicators do provide incremental information and may have some practical value".^[57] Burton Malkiel dismissed the irregularities mentioned by Lo and McKinlay as being too small to profit from.^[64]
Technicians say^[who?] that the EMH and random walk theories both ignore the realities of markets, in that participants are not completely rational and that current price moves are not independent of previous moves.^[29]^[66] Some signal processing researchers negate the random walk hypothesis that stock market prices resemble Wiener processes, because the statistical moments of such processes and real stock data vary significantly with respect window size and similarity measure.^[67] They argue that feature transformations used for the description of audio and biosignals can also be used to predict stock market prices successfully which would contradict the random walk hypothesis.
The random walk index (RWI) is a technical indicator that attempts to determine if a stock’s price movement is random in nature or a result of a statistically significant trend. The random walk index attempts to determine when the market is in a strong uptrend or downtrend by measuring price ranges over N and how it differs from what would be expected by a random walk (randomly going up or down). The greater the range suggests a stronger trend.^[68]

Scientific Technical Analysis[edit]

Caginalp and Balenovich in 1994^[69] used their asset-flow differential equations model to show that the major patterns of technical analysis could be generated with some basic assumptions. Some of the patterns such as a triangle continuation or reversal pattern can be generated with the assumption of two distinct groups of investors with different assessments of valuation.The major assumptions of the models are that the finiteness of assets and the use of trend as well as valuation in decision making. Many of the patterns follow as mathematically logical consequences of these assumptions.
One of the problems with conventional technical analysis has been the difficulty of specifying the patterns in a manner that permits objective testing.
Japanese candlestick patterns involve patterns of a few days that are within an uptrend or downtrend. Caginalp and Laurent^[70] were the first to perform a successful large scale test of patterns. A mathematically precise set of criteria were tested by first using a definition of a short term trend by smoothing the data and allowing for one deviation in the smoothed trend. They then considered eight major three day candlestick reversal patterns in a non-parametric manner and defined the patterns as a set of inequalities. The results were positive with an overwhelming statistical confidence for each of the patterns using the data set of all S&P 500 stocks daily for the five year period 1992-1996.
Among the most basic ideas of conventional technical analysis is that a trend, once established, tends to continue. However, testing for this trend has often led researchers to conclude that stocks are a random walk. One study, performed by Poterba and Summers,^[71] found a small trend effect that was too small to be of trading value. As Fisher Black noted,^[72] "noise" in trading price data makes it difficult to test hypotheses.
One method for avoiding this noise was discovered in 1995 by Caginalp and Constantine^[73] who used a ratio of two essentially identical closed-end funds to eliminate any changes in valuation. A closed-end fund (unlike an open-end fund) trades independently of its net asset value and its shares cannot be redeemed, but only traded among investors as any other stock on the exchanges. In this study, the authors found that the best estimate of tomorrow's price is not yesterday's price (as the efficient market hypothesis would indicate), nor is it the pure momentum price (namely, the same relative price change from yesterday to today continues from today to tomorrow). But rather it is almost exactly halfway between the two.
A survey of modern studies by Park and Irwin^[74] showed that most found a positive result from technical analysis.
In recent years, Caginalp and DeSantis^[75] have used large data sets of closed-end funds, where comparison with valuation is possible, in order to determine quantitatively whether key aspects of technical analysis such as trend and resistance have scientific validity. Using data sets of over 100,000 points they demonstrate that trend has an effect that is at least half as important as valuation. The effects of volume and volatility, which are smaller, are also evident and statistically significant. An important aspect of their work involves the nonlinear effect of trend. Positive trends that occur within approximately 3.7 standard deviations have a positive effect. For stronger uptrends, there is a negative effect on returns, suggesting that profit taking occurs as the magnitude of the uptrend increases. For downtrends the situation is similar except that the "buying on dips" does not take place until the downtrend is a 4.6 standard deviation event. These methods can be used to examine investor behavior and compare the underlying strategies among different asset classes.

Ticker tape reading[edit]

Main article: Ticker tape
Until the mid-1960s, "tape reading" was a popular form of technical analysis. It consisted of reading market information such as price, volume, order size, and so on from a paper strip which ran through a machine called a stock ticker. Market data was sent to brokerage houses and to the homes and offices of the most active speculators. This system fell into disuse with the advent of electronic information panels in the late 60's, and later computers, which allow for the easy preparation of charts.

Quotation board[edit]

Another form of technical analysis used so far was via interpretation of stock market data contained in quotation boards, that in the times before electronic screens, were huge chalkboards located into the stock exchanges, with data of the main financial assets listed on exchanges for analysis of their movements.^[76] It was manually updated with chalk, with the updates regarding some of these data being transmitted to environments outside of exchanges (such as brokerage houses, bucket shops, etc.) via the aforementioned tape, telegraph, telephone and later telex.^[77]
This analysis tool was used both, on the spot, mainly by market professionals for day trading and scalping, as well as by general public through the printed versions in newspapers showing the data of the negotiations of the previous day, for swing and position trades.^[78]
Despite to continue appearing in print in newspapers, as well as computerized versions in some websites, analysis via quotation board is another form of technical analysis that has fallen into disuse by the majority.

Technical Analysis 4

2013-11-24T22:30:00.003+07:00

Technical Analysis 4

Industry[edit]

The industry is globally represented by the International Federation of Technical Analysts (IFTA), which is a Federation of regional and national organizations. In the United States, the industry is represented by both the Market Technicians Association (MTA) and the American Association of Professional Technical Analysts (AAPTA). The United States is also represented by the Technical Security Analysts Association of San Francisco (TSAASF). In the United Kingdom, the industry is represented by the Society of Technical Analysts (STA). In Canada the industry is represented by the Canadian Society of Technical Analysts.^[34] In Australia, the industry is represented by the Australian Technical Analysts Association (ATAA),^[35] (which is affiliated to IFTA) and the Australian Professional Technical Analysts (APTA) Inc.^[36]
Professional technical analysis societies have worked on creating a body of knowledge that describes the field of Technical Analysis. A body of knowledge is central to the field as a way of defining how and why technical analysis may work. It can then be used by academia, as well as regulatory bodies, in developing proper research and standards for the field.^[37] The Market Technicians Association (MTA) has published a body of knowledge, which is the structure for the MTA's Chartered Market Technician (CMT) exam.^[38]

Systematic trading[edit]

Neural networks[edit]

Since the early 1990s when the first practically usable types emerged, artificial neural networks (ANNs) have rapidly grown in popularity. They are artificial intelligence adaptive software systems that have been inspired by how biological neural networks work. They are used because they can learn to detect complex patterns in data. In mathematical terms, they are universal function approximators,^[39]^[40] meaning that given the right data and configured correctly, they can capture and model any input-output relationships. This not only removes the need for human interpretation of charts or the series of rules for generating entry/exit signals, but also provides a bridge to fundamental analysis, as the variables used in fundamental analysis can be used as input.
As ANNs are essentially non-linear statistical models, their accuracy and prediction capabilities can be both mathematically and empirically tested. In various studies, authors have claimed that neural networks used for generating trading signals given various technical and fundamental inputs have significantly outperformed buy-hold strategies as well as traditional linear technical analysis methods when combined with rule-based expert systems.^[41]^[42]^[43]
While the advanced mathematical nature of such adaptive systems has kept neural networks for financial analysis mostly within academic research circles, in recent years more user friendly neural network software has made the technology more accessible to traders. However, large-scale application is problematic because of the problem of matching the correct neural topology to the market being studied.

Backtesting[edit]

Systematic trading is most often employed after testing an investment strategy on historic data. This is known as backtesting. Backtesting is most often performed for technical indicators, but can be applied to most investment strategies (e.g. fundamental analysis). While traditional backtesting was done by hand, this was usually only performed on human-selected stocks, and was thus prone to prior knowledge in stock selection. With the advent of computers, backtesting can be performed on entire exchanges over decades of historic data in very short amounts of time.
The use of computers does have its drawbacks, being limited to algorithms that a computer can perform. Several trading strategies rely on human interpretation,^[44] and are unsuitable for computer processing.^[45] Only technical indicators which are entirely algorithmic can be programmed for computerised automated backtesting.

Combination with other market forecast methods[edit]

John Murphy states that the principal sources of information available to technicians are price, volume and open interest.^[10] Other data, such as indicators and sentiment analysis, are considered secondary.
However, many technical analysts reach outside pure technical analysis, combining other market forecast methods with their technical work. One advocate for this approach is John Bollinger, who coined the term rational analysis in the middle 1980s for the intersection of technical analysis and fundamental analysis.^[46] Another such approach, fusion analysis,^[47] overlays fundamental analysis with technical, in an attempt to improve portfolio manager performance.
Technical analysis is also often combined with quantitative analysis and economics. For example, neural networks may be used to help identify intermarket relationships.^[48] A few market forecasters combine financial astrology with technical analysis. Chris Carolan's article "Autumn Panics and Calendar Phenomenon", which won the Market Technicians Association Dow Award for best technical analysis paper in 1998, demonstrates how technical analysis and lunar cycles can be combined.^[49] Calendar phenomena, such as the January effect in the stock market, are generally believed to be caused by tax and accounting related transactions, and are not related to the subject of financial astrology.
Investor and newsletter polls, and magazine cover sentiment indicators, are also used by technical analysts.^[50]

Technical Analysis 3

2013-11-24T22:29:00.004+07:00

Technical Analysis 3

Principles[edit]

Stock chart showing levels of support (4,5,6, 7, and 8) and resistance (1, 2, and 3); levels of resistance tend to become levels of support and vice versa.

A fundamental principle of technical analysis is that a market's price reflects all relevant information, so their analysis looks at the history of a security's trading pattern rather than external drivers such as economic, fundamental and news events. Therefore, price action tends to repeat itself due to investors collectively tending toward patterned behavior – hence technical analysis focuses on identifiable trends and conditions.^[27]^[28]

Market action discounts everything[edit]

Based on the premise that all relevant information is already reflected by prices, technical analysts believe it is important to understand what investors think of that information, known and perceived.

Prices move in trends[edit]

History tends to repeat itself[edit]

Technical analysts believe that investors collectively repeat the behavior of the investors that preceded them. To a technician, the emotions in the market may be irrational, but they exist. Because investor behavior repeats itself so often, technicians believe that recognizable (and predictable) price patterns will develop on a chart.^[10] Recognition of these patterns can allow the technician to select trades that have a higher probability of success.^[30]
Technical analysis is not limited to charting, but it always considers price trends.^[1] For example, many technicians monitor surveys of investor sentiment. These surveys gauge the attitude of market participants, specifically whether they are bearish or bullish. Technicians use these surveys to help determine whether a trend will continue or if a reversal could develop; they are most likely to anticipate a change when the surveys report extreme investor sentiment^[31] Surveys that show overwhelming bullishness, for example, are evidence that an uptrend may reverse; the premise being that if most investors are bullish they have already bought the market (anticipating higher prices). And because most investors are bullish and invested, one assumes that few buyers remain. This leaves more potential sellers than buyers, despite the bullish sentiment. This suggests that prices will trend down, and is an example of contrarian trading.^[32]
Recently, Kim Man Lui, Lun Hu, and Keith C.C. Chan have suggested that there is statistical evidence of association relationships between some of the index composite stocks whereas there is no evidence for such a relationship between some index composite others. They show that the price behavior of these Hang Seng index composite stocks is easier to understand than that of the index.^[33

Technical Analysis 2

2013-11-24T22:28:00.002+07:00

Technical Analysis 2

General description[edit]

Fundamental analysts examine earnings, dividends, new products, research and the like. Technicians employ many methods, tools and techniques as well, one of which is the use of charts. Using charts, technical analysts seek to identify price patterns and market trends in financial markets and attempt to exploit those patterns.^[10]
Technicians using charts search for archetypal price chart patterns, such as the well-known head and shoulders or double top/bottom reversal patterns, study technical indicators, moving averages, and look for forms such as lines of support, resistance, channels, and more obscure formations such as flags, pennants, balance days and cup and handle patterns.^[11]
Technical analysts also widely use market indicators of many sorts, some of which are mathematical transformations of price, often including up and down volume, advance/decline data and other inputs. These indicators are used to help assess whether an asset is trending, and if it is, the probability of its direction and of continuation. Technicians also look for relationships between price/volume indices and market indicators. Examples include the relative strength index, and MACD. Other avenues of study include correlations between changes in Options (implied volatility) and put/call ratios with price. Also important are sentiment indicators such as Put/Call ratios, bull/bear ratios, short interest, Implied Volatility, etc.
There are many techniques in technical analysis. Adherents of different techniques (for example, candlestick charting, Dow Theory, and Elliott wave theory) may ignore the other approaches, yet many traders combine elements from more than one technique. Some technical analysts use subjective judgment to decide which pattern(s) a particular instrument reflects at a given time and what the interpretation of that pattern should be. Others employ a strictly mechanical or systematic approach to pattern identification and interpretation.
Technical analysis is frequently contrasted with fundamental analysis, the study of economic factors that influence the way investors price financial markets. Technical analysis holds that prices already reflect all such trends before investors are aware of them. Uncovering those trends is what technical indicators are designed to do, imperfect as they may be. Fundamental indicators are subject to the same limitations, naturally. Some traders use technical or fundamental analysis exclusively, while others use both types to make trading decisions.^[12]

Characteristics[edit]

Technical analysis employs models and trading rules based on price and volume transformations, such as the relative strength index, moving averages, regressions, inter-market and intra-market price correlations, business cycles, stock market cycles or, classically, through recognition of chart patterns.
Technical analysis stands in contrast to the fundamental analysis approach to security and stock analysis. Technical analysis analyzes price, volume and other market information, whereas fundamental analysis looks at the facts of the company, market, currency or commodity. Most large brokerage, trading group, or financial institutions will typically have both a technical analysis and fundamental analysis team.
Technical analysis is widely used among traders and financial professionals and is very often used by active day traders, market makers and pit traders. In the 1960s and 1970s it was widely dismissed by academics. In a recent review, Irwin and Park^[13] reported that 56 of 95 modern studies found that it produces positive results but noted that many of the positive results were rendered dubious by issues such as data snooping, so that the evidence in support of technical analysis was inconclusive; it is still considered by many academics to be pseudoscience.^[14] Academics such as Eugene Fama say the evidence for technical analysis is sparse and is inconsistent with the weak form of the efficient-market hypothesis.^[15]^[16] Users hold that even if technical analysis cannot predict the future, it helps to identify trading opportunities.^[17]
In the foreign exchange markets, its use may be more widespread than fundamental analysis.^[18]^[19] This does not mean technical analysis is more applicable to foreign markets, but that technical analysis is more recognized as to its efficacy there than elsewhere. While some isolated studies have indicated that technical trading rules might lead to consistent returns in the period prior to 1987,^[20]^[21]^[22]^[23] most academic work has focused on the nature of the anomalous position of the foreign exchange market.^[24] It is speculated that this anomaly is due to central bank intervention, which obviously technical analysis is not designed to predict.^[25] Recent research suggests that combining various trading signals into a Combined Signal Approach may be able to increase profitability and reduce dependence on any single rule.^[26]

Technical analysis 1

2013-11-24T22:26:00.003+07:00

Technical analysis

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v t e

In finance, technical analysis is a security analysis methodology for forecasting the direction of prices through the study of past market data, primarily price and volume.^[1] Behavioral economics and quantitative analysis use many of the same tools of technical analysis,^[2]^[3]^[4]^[5] which, being an aspect of active management, stands in contradiction to much of modern portfolio theory. The efficacy of both technical and fundamental analysis is disputed by the efficient-market hypothesis which states that stock market prices are essentially unpredictable.^[6]

History[edit]

The principles of technical analysis are derived from hundreds of years of financial markets data.^[7] Some aspects of technical analysis began to appear in Joseph de la Vega's accounts of the Dutch markets in the 17th century. In Asia, technical analysis is said to be a method developed by Homma Munehisa during early 18th century which evolved into the use of candlestick techniques, and is today a technical analysis charting tool.^[8]^[9] In the 1920s and 1930s Richard W. Schabacker published several books which continued the work of Charles Dow and William Peter Hamilton in their books Stock Market Theory and Practice and Technical Market Analysis. In 1948 Robert D. Edwards and John Magee published Technical Analysis of Stock Trends which is widely considered to be one of the seminal works of the discipline. It is exclusively concerned with trend analysis and chart patterns and remains in use to the present. As is obvious, early technical analysis was almost exclusively the analysis of charts, because the processing power of computers was not available for statistical analysis. Charles Dow reportedly originated a form of point and figure chart analysis.
Dow Theory is based on the collected writings of Dow Jones co-founder and editor Charles Dow, and inspired the use and development of modern technical analysis at the end of the 19th century. Other pioneers of analysis techniques include Ralph Nelson Elliott, William Delbert Gann and Richard Wyckoff who developed their respective techniques in the early 20th century. More technical tools and theories have been developed and enhanced in recent decades, with an increasing emphasis on computer-assisted techniques using specially designed computer software.

เลือกกราฟหุ้นเทคนิคดีของเช้าวันจันทร์ที่ 18 พฤศจิกายน 2556

2013-11-16T23:34:00.000+07:00

เลือกกราฟหุ้นเทคนิคดีของเช้าวันจันทร์ที่ 18 พฤศจิกายน 2556

ผมว่า QH น่าสนใจนะครับ

MACD > Signal และกำลังจะตัดเส้น 0
Volume ก็ไม่น้อย
EMAV5 กำลังตัดขึ้น ทั้ง 15

การลงทุนมีความเสี่ยงโปรดใช้วิจารณญาณในการใช้ข้อมูล
น้อมรับคำแนะนำและติชมทั้งหมดนะครับ วิธีการดูกราฟของผม มาจากประสบการณ์ส่วนตัวนะครับ ซึ่งต้องการฝึกฝนต่อไป
By Pelepae

Technical Indicator : Relative Strength Index (RSI)

2013-11-15T22:29:00.002+07:00

Technical Indicator : Relative Strength Index (RSI)

สูตรการคำนวณ

RSI = 100 – (100/(1+RS*))

*RS มาจาก = จำนวนวันที่ราคาเปิดบวก / จำนวนวันที่ราคาปิดลบ

RSI ที่คำนวณได้ จะมีค่าอยู่ระหว่าง 0 ถึง 100

หลักการใช้งานที่นิยม

มากกว่าหรือเท่ากับ 70 คือ Over Bought ต้องขายทำกำไร

น้อยกว่าหรือเท่ากับ 30 คือ Over Sold ต้องซื้อเพราะหุ้นกำลังราคาถูก

ข้อเสียของ RSI

จากสมการทางคณิตศาสตร์ หากราคาหุ้นมีราคาปิดใกล้เคียงกันหลายๆวัน มันอาจมีผลให้ RS = 1 จะมีแน้วโน้มทำให้ RSI วื่งเข้าสู่ 50 (ค่ากลาง) นำมาสู่ข้อเสียคือ เมื่อ RSI ต่ำกว่า 30 เราเข้าซื้อ แต่เมื่อราคาปิดใกล้เคียงกันในช่วงเวลาหนึ่งจะทำให้ RSI สูงขึ้นได้โดยราคาไม่จำเป็นต้องขึ้นเลย เช่น RSi เพิ่มจาก 28 เป็น 45 โดยที่ราคาของหุ้นยังเท่ากับตอนที่เราซื้อมาตอนแรก

Pelepae

เลือกกราฟหุ้นเทคนิคดีของเช้าวันจันทร์ที่ 11 พฤศจิกายน 2556

2013-11-10T22:40:00.000+07:00

เลือกกราฟหุ้นเทคนิคดีของเช้าวันจันทร์ที่ 11 พฤศจิกายน 2556

กราฟหุ้นดูแบบเทคนิคล้วนๆไม่สนข่าว ไม่สนการเมือง โดยจะต้องตั้งแนวรับแนวต้านให้ชัดเจน ดูไปดูมา เจอหลายตัวอยู่ เลยจัดมาให้ดูสักสามกราฟได้แก่

INTU01PC

JAS01PB

ไปเราเริ่มไปดูกราฟหุ้นแต่ละตัวกัน

กราฟหุ้น PS : แนวโน้วขาขึ้น

STOP LOSS < 21
BUY SIGNAL > 22
MACD > Signal และมากกว่า > 0
Volume สูง
EMAV5 มากกว่าทั้ง 15 และ 35 วัน

กราฟหุ้น INTU01PC : แนวโน้วขาขึ้น

STOP LOSS < -10% ของราคาซื้อ
BUY SIGNAL > -
MACD > Signal และมากกว่า > 0
Volume สูง
EMAV5 มากกว่าทั้ง 15 และ 35 วัน

กราฟหุ้น JAS01PB : แนวโน้วขาขึ้น

STOP LOSS < -10% ของราคาซื้อ
BUY SIGNAL > -
MACD > Signal และมากกว่า > 0
Volume สูง
EMAV5 มากกว่าทั้ง 15 และ 35 วัน

การลงทุนมีความเสี่ยงโปรดใช้วิจารณญาณในการใช้ข้อมูล
น้อมรับคำแนะนำและติชมทั้งหมดนะครับ วิธีการดูกราฟของผม มาจากประสบการณ์ส่วนตัวนะครับ ซึ่งต้องการฝึกฝนต่อไป
By Pelepae

เริ่มต้นลงทุนในหุ้น วิเคราะห์ทางพื้นฐาน และทางเทคนิค กราฟหุ้น ควบคู่กัน

Technical Analysis 12

Price channels

References[edit]

See also[edit]

Technical Analysis 20

Morning star (candlestick pattern)

Contents

Description[edit]

Interpretation[edit]

See also[edit]

External links[edit]

Technical Analysis 19

Three Black Crows

See also[edit]

References[edit]

External links[edit]

Technical Analysis 18

Three white soldiers

Contents

See also[edit]

Notes[edit]

References[edit]

External links[edit]

Technical Analysis 17

Gap (chart pattern)

Contents

Types of gaps[edit]

Caution[edit]

Trading gaps for profit[edit]

Examples[edit]

References[edit]

External links[edit]

Technical Analysis 16

Island reversal

Formation[edit]

Characteristics[edit]

Technical Analysis 15

Flag and pennant patterns

Flag pattern[edit]

Pennant pattern[edit]

External links[edit]

Technical Analysis 14

Triangle (chart pattern)

Contents

The ascending triangle[edit]

The descending triangle[edit]

The symmetrical triangle[edit]

External links[edit]

See also[edit]

Technical Analysis 13

Wedge pattern

Falling wedge[edit]

Rising wedge[edit]

External links[edit]

Technical Analysis 11

Broadening top

Contents

Point of formation[edit]

Role of big players[edit]

Price and volume[edit]

How broadening top is formed[edit]

See also[edit]

Other chart patterns[edit]

Technical Analysis 10

Triple top and triple bottom

Triple top[edit]

Triple bottom[edit]

External links[edit]

Technical Analysis 9

Double top and double bottom

Double top[edit]

Double bottom[edit]

External links[edit]

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Technical Analysis 8