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10/21/02  

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The analysis of chart patterns and trading volume to determine attractive opportunities for buying or unattractive opportunities for short selling. A discussion of buy signals and sell signals. 

What is Technical Analysis?

 This widely used approach employs charts depicting price charts (daily or weekly), and daily and weekly trading volumes. Each price tick will show the daily range, as well as the open price and the closing price. Pure Technicians do not involve themselves with the business, competitive dynamics, valuation, growth rates, etc. 

Technicians use chart patterns to forecast future price movements. Fundamentalists also can use technical charts to determine entry and exit points where stocks are extended or have retraced a big price move and should commence a new up-leg. Additionally, setting price targets and protective stop levels are assisted by using charts. 

Investment time periods vary from the intraday (day trading), to short term, to intermediate, to long term. Short term normally implies days to weeks, intermediate implies weeks to months, while long term means months to years. The types of charts each type of trading horizon should employ is listed below. Moving Averages suggest the smooth trends in the stock most often used by technical investors based on time horizon.

Type of Trader Time Horizon Prices for Charts Moving Averages

Look for
Day Trader One day to a week every five minutes on day charts plus 20 day and one year charts 10 day and 50 day moving averages High volume on trend-line breaks and breaks above or below MA's
Short Term days to weeks daily price charts covering 20 days and one year 50 day moving averages High volume on trend-line breaks and breaks above or below MA's, with weak volume on breakdowns
Intermediate weeks to months daily price charts covering 20 days, one year and 3 years 50, 150 and 200 day moving averages High volumes on breakouts, and low volumes on breakdowns
Long Term months to years Daily and weekly price charts covering three years 50, 150, 200 day moving averages High volume on breakouts and low volumes on breakdowns and downtrends

 

 

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Trading/ Technical Analysis Center
What is Technical Analysis?
Breakouts and Breakdowns
Trendlines and Moving Averages
Trend Reversals
Detrending Oscillators
Chart Patterns
Great Patterns to Buy
Great Patterns to Short
Trending vs. Trading Stocks
Swing Rule
Trading Relative Strength
Industry Sectors

Past Trading Results

 

 

 

 

Disclaimer

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