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Type of Securities Investment Strategies Fundamental Analysis Technical Analysis

Technical  Analysis Categories

 - Types of Charts
      * Bar Charts
      * Line Charts
      * Candlestick Charts

 - Chart Reading
      * Trendlines
      *  Resistance Levels
      *  Support Levels

 - Moving Average
     * Simple Moving Average
      * Weighted Moving Average
      * Exponential Moving Average
      * Triangular Moving Average

 - Momentum Indicators &
    Oscillators
 - Rate of Change
 - Relative Strength Index
 - Moving Averages
    Convergence /  Divergences
 - Price Oscillator
 - Stochastic
 - Money Flow Index
 - Williams %R
 - Volume + Moving Average

 - Stock Chart Overlays:
 - Bollinger Bands
 - Parabolic SAR

 - Stock Chart Patterns:
     * Head and Shoulders
     * V Formations
     * Double Tops and Bottoms
     * Triple Tops and Bottoms
     * Saucers - Rounded Tops and
         Bottoms
     * Ascending, Descending and
         Symmetrical Triangles
     * Channels - Rectangles
     * Rising and Falling Wedges
     * Bullish and Bearish Flags
     * Pennants
     * Diamonds
     * Cup and Handle
     * Pan and Handle
     * Spikes
     * One-Day Reversals
     * Island Reversal

 - Dow Theory

 - Elliot Wave Theory

 - Spinella Heart Rate Theory

 - Fibonacci

 

 


Chart Reading

When analyzing a stock chart there are three main areas that investors need to focus on; as outlined below:

  • The Trendlines – The trendlines indicate the general direction of the security. A straight line connects the high stock prices of a sideways trend. The high prices are the resistance points for that particular security. Another straight line connects the low price points of the stock. The low prices are the support levels for the stock. The difference between the two trendlines is the stock’s trading range. Technical analysts usually trade in the direction of the trend.
  • Resistance Levels – They are the higher stock prices on the upper horizontal trendline. Similar to a glass ceiling or the top end for a particular security, an extra push is needed to break through to a higher level. If a stock cannot break through its resistance level, it is an indication that the stock has reached its high; it may be time to sell the security.
  • Support Levels – They are the lower stock prices on the horizontal bottom price trendline. It is the floor of a stock’s trading range, and a pull is needed to break through the floor to a lower trading level. When a stock hits the support level, it is usually considered a buying opportunity. If the stock breaks through the support level, however, it is generally an indication to sell the security.

When a stock breaks through its support or resistance levels, a "flip flop" occurs. The previous resistance level becomes the new support level for the next trend, and likewise, the previous support level becomes the resistance level for the next trend.

The first step in utilizing charts is to identify the security of interest; the charts then become a valuable part of the decision making process. Investors need to scrutinize their transactions, so that they receive the best return they can on a stock. If investors purchase a stock at $10 a share and it increases to $20, they have doubled their money, for a 100% gain. Now, if they effectively use the charts, and purchase the stock at $9 and sell it for $21, they have a 133% gain. While the $2 difference may not seem like a lot of money, the percentage difference is significant, and adds up over a lifetime. Many investors are afraid to lose a stock, and pay more than they should. I have found that there is always another good buy and that overpaying for a stock is just a mistake. It’s better to pass on a stock than to overpay. Additionally, understand the dividend dates, and try to collect dividends when possible. The point of using technical analysis is to attempt to time the markets, to maximize investment returns.

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