Investing in Shares
Introduction to Technical
Australian Shareholders Association
Tutorial Resource Library
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• What is Technical Analysis
• What is involved?
• Price Charts
• Candlesticks & Candlestick Patterns
• Support and Resistance
• Moving Averages
• Chart Patterns
What is Technical Analysis
• Technical analysis is the study of the price and volume
movements of a stock or market.
• It is based on the belief that everything that is known
about a stock is reflected in the share price and the
volume of shares traded.
• Technical analysis can give indicators to investors as to
when to buy or sell by providing insights into market
• Can be used on all timeframes –
daily, weekly, monthly
• Covers many techniques – pick a
few to add to your technical analysis
What’s involved in Technical Analysis?
Candlesticks & Candlestick Patterns
Support and Resistance
Elliot Wave, W.D Gann Theory, Cycles
...... Plus a whole lot more!
This presentation will provide an overview of the first six
topics listed here.
• Technical analysis uses data based on price and
volume – data can be from a daily, weekly,
monthly or even shorter timeframe (e.g. hour)
– open, low, high, and close prices from the set
timeframe e.g. one trading day or one trading week,
• The data is presented in a chart
• There are many different types of charts
• We will look at 3 types of charts
– line charts
– bar chart
– candlestick charts
The three charts on the following three slides
are of the same stock over the same time
1st is a Line Chart
2nd is a Bar Chart
3rd is a Candlestick Chart
Look at the difference in detail in each of the
Usually, based on the close price, cuts out the ‘noise’
More detail, can see the open, high, low close so
investor can get a ‘feel’ for sentiment
More visual, easier for investor to see open, high, low
close and sentiment
Types of Charts Key Differences
Line Chart - usually, based on the close price,
cuts out the ‘noise’
Bar Chart – more detail, can see the open, high,
low close so can get a ‘feel’ for sentiment
Candlestick Chart – more visual, easier to see
open, high, low close and sentiment
A candlestick is another way of looking at price data
– more visual as filled in bars represent negative
Candles can have names applied to them,
however, you don’t need to learn them!
It is more important to understand the price
action that the candle represents and what it
is saying about the buyers and the sellers.
You might hear terms describing candles like
Doji, Shooting Star, Hammer, Harami,
Engulfing, Piercing, Hanging Man, Evening
Let’s look at a two examples and see
what they mean for supply
(sellers) and demand (buyers)
The candle shown here is a normal bullish candle.
The body of the candle is not filled so we know
that the price opened at the bottom of the body
of the candle and closed at the top of the body.
Sometime during the day, price traded to the
bottom of the lower ‘wick’ or tail and to the top
of the upper ‘wick’.
From a supply and demand perspective, this
candle is showing positive sentiment, buyers
were prepared to pay more for this stock and
pushed the price up so that it closed near the
The candle shown here is called a Doji candle – this
one has a special name, it is called a Gravestone doji.
The price opened and closed at the same price so
there is no body to this candle. During the trading
period, buyers pushed the price up, but sellers came
into the market and pushed the price back down so
that the trading session closed on its lows.
If this candle occurred after an uptrend, this could
indicate a potential change in trend. A Gravestone
doji is generally a bearish or negative sentiment
Learning about candles and using them on your
charts can be a useful investing tool.
Candles and candle patterns provide you with a
visual representation of market psychology
There are lots more types of candles and
combinations of candles to make patterns.
Do your own research to learn
Candlestick Key Points to Remember
• Length of body – long or short, what is it
• Length of tails – or absence of tails, what does
• Can suggest a possible change in trend
Candlesticks shouldn’t be used in
isolation to make buy and sell
decisions BUT used with other
‘western’ technical tools they can
add value to your investing
• Perhaps the simplest form of technical analysis
• Markets are not random they often move in trends
• And these trends can be marked on a chart by the
drawing of trend lines
A series of higher highs and higher lows
Downtrend, sideways & change of
Downtrend – a series of lower highs and lower lows
Change of trend – when a
higher low is made and the
previous high is surpassed
A support level is the price at which buyers are
expected to enter the market in sufficient
numbers to take control from sellers.
A support line can be horizontal or sloping
A resistance level is the price level at which sellers
are expected to enter the market in sufficient
numbers to take control from buyers.
A resistance line can be horizontal or sloping
Support & Resistance
In this chart, old resistance becomes new support and a clear
break of the support line at the right of the chart was a signal
to exit the stock
• Moving Averages (MA’s) are a way of coping
with the problem of random information.
• MA’s are lagging indicators and are the basis
of many other indicators
• MA’s take data points and plot them as an
average making it easier to discern trends
There are many types of
moving averages – simple,
One of the most common MA’s is the 200 Day
Simple Moving Average.
It is often quoted as providing support or
resistance to price action for various stocks
Because it is so widely used, it
may be beneficial to become
familiar with it.
Simple Moving Average – 200 Day
This is a 200 Day simple moving average plotted
Multiple Moving Averages
Another form of moving averages is the
Multiple Moving Averages or MMA’s.
• Developed by Australian trader and investor
Daryl Guppy they present a very visual
representation of the sentiment of traders
• The longer term MMA’s are said to represent
the action of investors and the shorter term
MMA’s that of traders.
• The interaction between the two groups of
MMA’s can be used to time entries and exits.
Multiple Moving Averages
Guppy Multiple Moving Averages plotted on a
Chart patterns reflect human behaviour in a market
and can be seen on all timeframe charts.
The following chart patterns offer a high probability
of future market movement and can be used to
select stocks or to time entries into stocks.
• The triangle
• The flag
• Double tops
• Head and shoulders
Reversal or Continuation
A continuation and reversal pattern ….
A series of ascending triangles – examples of
Flag continuation patterns – investors could look
for breakouts from the pattern
• Reversal patterns can usually be found at the
beginning or end of trends.
• They can form on any timeframe chart,
however, the longer the timeframe the more
significant the pattern.
• In some cases the height of
the pattern can be used to
estimate the price targets
if price breaks the pattern.
A Double top on a weekly chart – taking a long
time to form, reversing a long term uptrend
Head and Shoulders
A Head & Shoulders pattern – the neckline can
slope in either direction
Bottom Reversal Patterns
A Double Bottom pattern
Bottom Reversal Patterns
A Reverse Head and Shoulder pattern
• Technical Analysis does not provide a forecast.
• It provides tools to gauge the probability that
a future event may occur.
• Always be aware of the time frame – look at
the longest time frame charts first to get the
• Generally signals in longer
time frames are more
reliable than those in
shorter time frames.
To find out about other learning resources
available to investors, explore the ASA’s
Investor Education Pathway