2. What is Technical Analysis?
Fundamental Analysis:
• Valuate company using past performances, financial
status, and future growth.
• The key is to find undervalued stock
Technical Analysis
• Intrinsic value of company does not matter; it’s what
investors are willing to pay
• Observe behaviors within the market
• Past occurrences can predict future actions
3. What we look at
Fundamental Analysis: net income, cash, cash flow,
growth etc.
Technical Analysis: price and volume.
Price : how much it’s worth in the market, its movement
over time
Volume: the strength of movement. When the price goes
up, is it because lots of people start moving into the
market? Or is there already lots of people in it?
4. Charts – Candlesticks
• Started in Japan in 1700s for rice trade
• There’s a link between price and supply & demand of rice BUT
there’s also the emotions of traders.
• Thus, there’s a difference between the price and the value of rice
caused by trader emotions.
• The candlestick chart analysis measures the market emotions.
• Thus, reflect the short-term outlooks
6. Charts – Candlesticks
• Long body –
• Price of stock was in wide range during trading
session
• Open near low/high and closed near high/low of day
• Tells us… bearish or bullish
• Small body –
• Price of stock varied but…
• Open and closed near the same price
• Is neutral or indecisive of market
7. Charts – Candlesticks
• Look at the trend of the market preceding the
pattern
• Hanging Man – when it is after a rally, it can
suggest a beginning of a downward trend.
• Lower shadow is about 2-3x as long as body
• Little to no upper shadow
• Body is at the upper end of range
• Black body is more bearish than white
8. Charts – Candlesticks
• Lucent Technologies
• 3 days of stock price rising
• Then hanging man appears
• Next day, stock price drops over 20%
From investopedia.com
10. Support & Resistance
Support: a level where buyers are willing to buy; reenter the market
Resistance: More selling than buying, investors believe price too high
Resistance
Support
*There is no definite value of support and resistance level, only a Range of price.*
11. Trend
• a movement in one direction, until there’s a shift in the force of
demand and supply causing the reverse
• doesn’t necessary be a smooth line
15. Moving Averages (MA)
• What’s MA?
• It smooth out price data and observe the general
direction of movement for a stock.
• Types of MA:
• 10-day, 20-day, 50-day, 100-day, 200-day
• Function:
1.Signal to Buy/Sell
2.Support
16. MA – Signal to Buy
• Key: Crossover & Movement
• ST: 10-day MA crosses 20-
day MA Moving
Upwards
• MT: 10-day MA & 50-day MA;
Up
• LT: 10-day MA &100-day MA;
Up
Signal to Buy/Sell Support
17. MA – Signal to Sell
• ST: 10-day MA crosses 20-day
MA Moving Downwards
• MT: 10-day MA & 50-day MA;
Down
• LT: 10-day MA &100-day MA;
Down
• The Longer the Time Frame,
The Stronger the Signal Is
Signal to Buy/Sell Support
18. MA – Example 1: Google (GOOG)
Signal to Buy/Sell Support
19. MA – Example 2: Apple (AAPL)
Signal to Buy/Sell Support
21. MA – Example 4: JSC Tatneft (TNT)
Signal to Buy/Sell Support
22. MA
• What’s MA?
• It smooth out price data and observe the
general direction of movement for a stock.
• Types of MA:
• 10-day, 20-day, 50-day, 100-day, 200-day
• Function:
1.Signal to Buy/Sell
2.Support
Signal to Buy/Sell Support
23. MA – Support
Example: OXPS
•Strong support have been shown
at 10 & 20 MA
•Seldom fell below 50 MA
Signal to Buy/Sell Support
24. MA – Testing Support
Example: AAPL
•Strong support have been shown
at 20 MA
•Seldom fell below 50 MA
•Price fell down the 20 MA
test for 50 MA
•Price fell down the 50 MA
• test for 100 MA
Signal to Buy/Sell Support
25. Oscillators
• Signal the change by comparing rate of change in price action.
Compare to the past, has it move very far away?
• Usually signal overbought and oversold
• be careful: it might just be the beginning of the trend, only use it
in trading in neutral market
• Examples of oscillators used:
-Relative Strength Index (RSI)
-Moving Average Convergence Divergence (MACD)
-Stochastic
etc.
26. Relative Strength Index (RSI)
Measure the buying and selling forces, range between 0 and 100
RSI = 100 - 100/(1 + RS)
RS = Average of x days’ up closes/ Average of x days’ down closes
27. Moving Average Convergence
Divergence (MACD)
MACD line: subtracting 26-day exponential MA from 12-
day EMA
Signal line: 9-day EMA of MACD
What is EMA?
- it’s a weighted MA, giving more emphasis to more recent
trading days
Crossovers:
MACD falls under signal line bearish
MACD rises above signal line bullish
29. Stochastic
Theory:
In an uptrend market, closing prices tend to be near the highs
In a downtrend market, closing prices tend to be near the lows
%K line and %D line
%K = 100[(C - L14)/(H14 - L14)]
C = current closing price
L14 = lowest low price during 14-day period
H14 = highest high during 14-day period
%D = %K smoothed over three days
31. Conclusion
• When to use technical analysis:
• looking for short-term
• Indicators are only indicators
• When fundamental analysis is more
appropriate
• Long-term
• Or combine both