Basic intro to technical analysis   2013 05 02
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Basic intro to technical analysis 2013 05 02 Presentation Transcript

  • 1. Technical Analysis: is about... FORECASTINGprice movement, ...using:1. Price Trends2. Price Patterns3. Price & Volume
  • 2. What is thePrice TrendPureGold grocery storesCEBU Pacific airline1. Price Trends
  • 3. BUY2. Price Patterns
  • 4. Prices..UPTrading Volume … down ?Price TrendsPrice PatternsPrice & Volume IndicatorsPrices
  • 5. PriceVolumeThe trend, willbe sustained.Continue to BUYVolumeBut IF:The uptrend,will weaken.Stop Buying.IF:And IF:
  • 6. WeatherforecastTrafficforecast
  • 7. 100120160Stocks8040Stock FUNDSAlso:Next MonthOr, Next WeekYou buy at …Whatshould youdo, thisthis case?OK! …Now, whendo i sell?
  • 8. 50 - 5080%90%70%60%Professionals canmake decisionsinvolving millions, onhunches, backed upby intuition andscience.An amateur would wait tillevidence is overwhelminglyabundant. By that time, thetrade would be, too late.Opportunity LOST !
  • 9. “Fundamental” Vs. “Technical”9Fundamental AnalysisFinancials & EconomicsTechnical Analysis• Trends (to continue?)• Turning points (reversals)Sales– Costs= Net profitsEarningsperShareStock Price versusCompany VALUEPast pricesvs Future prices
  • 10. * At this price, the “STOP order” becomes a “Market Order”“Emergency exit”1.612“Successful Exit”ENTRY PRICE:BUY Stock at2 pesos / sh.A trading PLAN:Cut yourLosses 20% below? 30% below?Price Target
  • 11. Stop Order*From TWO PESOS in July 2010 to 12 pesos in APRIL 2011.TRADE = buy low, sell highLeisure & Resorts World (LR) 20% below? 30% below?ENTRY PRICEBUY Stock at 2pesosAt Your…“CUT LOSS” LEVEL12
  • 12. 12Parts of a price chartLook at price,Time periodAnd volume.PriceTime PeriodVolume
  • 13. PriceTime PeriodAdd: 20-periodMovingAverage + 50-period Moving Average
  • 14. Volume
  • 15. OpenHighCloseLowHighLowOpenCloseHighLowOpenCloseIntraday Price Chart O H L C Candlestick“BAR” Japanese
  • 16. HighLowOpenCloseHighLowOpenCloseHighLowOpenCloseIntraday Price Chart O H L C CandlestickFree Tutorial on INVESTOPEDIA.COM
  • 17. 23Candlestick versus O-H-L-COpen-High-Low-Close
  • 18. Technical Analysis: TOOLS1. Support & Resistance2. Trend Lines, Channels (continuation)3. Reversals: a turning point4. Moving Averages (tool)5. Special Patterns (“formations”)“Movement” : Continuation or Reversal6. Relative Strength Index
  • 19. Resistance = CEILINGSupport = FLOOR25
  • 20. Resistance = CEILINGSupport = FLOOR26Sellers SellersNomoreSellersBuyers Buyers
  • 21. Resistance = CEILINGSupport = FLOOR27
  • 22. BUYSELLBUYSELLBUYBUY urgentlyPrice Patterns
  • 23. BUYSELLBUYSELLBUYBUY urgentlyStrong“Escape”
  • 24. Sell at the Resistance Level?Buy at the Support Level?How shouldwe TRADEthis chart?
  • 25. How shouldwe TRADEthis chart?Sell at the Resistance Level?Buy at theSupportLevel?
  • 26. Analysis: AGI continued its sharp rally, closing 4.2% higher at PHP26.00yesterdayTrading Plan: Trend followers who bought on the breakout should justhold on to the stock and place trailing stops to protect gains. Buyersshould try to wait and buy close to PHP23.00-PHP24.00 as oscillators areat overbought levels. Support is at PHP23.00 while resistance is atPHP26.60
  • 27. Analysis: MPI continues to move higher and is now challenging thePHP6.00 resistance. However, MPI may be losing momentum as it hasrecently been moving higher on declining volume. The stock is movingon steady uptrend and is now nearly 50% higher since October 29,2012.Trading Plan: Watch resistance at PHP6.00. Buy on a breakout withhuge volume. Countertrend traders, though, may want to wait to buyas close to PHP5.75 as possible. Support levels are at PHP5.75 andPHP5.4565.755.605.45October201250%
  • 28. Technical Analysis: TOOLS1. Support & Resistance2. Trend Lines, Channels (continuation)3. Reversals: a turning point4. Moving Averages (tool)5. Special Patterns (“formations”)“Movement” : Continuation or Reversal6. Relative Strength Index
  • 29. 35Trends and TrendlinesDowntrendUptrendSideways
  • 30. “Look for the trend, & follow it.”Chances are, it will continue36The price pattern suggests the overall trendhistoryMakeyourmove!Do you see a pattern?Draw a LINE…Technical analysis is the study of stock price action.What for = to help us FOLLOW the price trend & make a profitable trade.
  • 31. Connect thelowsWhen line isbreached,the trendreverses.SELL uponthe reversalof anUptrendMaintainsThe UP-Trend
  • 32. Jan2008Jan2009Jan2010Jan2011Jan20121 EURO =1.27 Dollars1 EURO =1.55 DollarsMoving towards1 = 1, aWeaker EUROUPahead:BadNewsORGoodNews?What is theTrend?
  • 33. pesos / dolla4302052
  • 34. Splash CorporationTREND anddirection:Predicts withhigh probability
  • 35. • Gold GreatrewardGold Price: UP somemore, or DOWN?Notice the strongUPWARDS trend.Bet on theMAJOR Trend.Ignore theMINORTrend
  • 36. TrendChannels“Draw Two Lines...”To tame the wild swings
  • 37. ONE stock:Usechannelsandtrendlines
  • 38. Samestock:Usechannelsandtrendlines
  • 39. Technical Analysis: TOOLS1. Support & Resistance2. Trend Lines, Channels (continuation)3. Reversals: a turning point4. Moving Averages (tool)5. Special Patterns (“formations”)“Movement” : Continuation or Reversal6. Relative Strength Index
  • 40. “The trend is your friend”49Generally, UPSafeto “BUY”SELL orAVOIDWait till itTURNS.
  • 41. Do you see a clearTREND and direction?Wait for aREVERSALCebu Pacific
  • 42. CompleteREVERSALDownTrend“TurningPoint”
  • 43. Confirma ReversalGo FoR IT52? Goodiesfor thosewho WAIT.Do yousee aclearREVERSAL?
  • 44. AyalaCorp
  • 45. SM Investments Corp 994
  • 46. Technical Analysis: TOOLS1. Support & Resistance2. Trend Lines, Channels (continuation)3. Reversals: a turning point4. Moving Averages (tool)5. Special Patterns (“formations”)“Movement” : Continuation or Reversal6. Relative Strength Index
  • 47. 1Average of 20 days’stock pricesMove slightly to the right...
  • 48. 2Average of 20 days’stock prices1Move slightly to the right...
  • 49. 3Average of 20 days’stock prices1 2The DOTS form the line ofthe 20-period movingaverage.
  • 50. Price ( in green)Moving Averageis red
  • 51. 1Each GREEN DOT:ONE DAY OF TRADINGRed DOTAverage of 20 green dotsPrice (green dots)
  • 52. 21Red DOTAverage of next20 green dotsEach GREEN DOT:ONE DAY OF TRADING
  • 53. 31Red DOTAverage of next20 green dots2Each GREEN DOT:ONE DAY OF TRADING
  • 54. The RED Line: 20-period MOVINGAverage1,100200
  • 55. 1Blue DOTAverage of 50 green dotsEach GREEN DOT:ONE DAY OF TRADINGPrice (green dots)
  • 56. 21BLUE DOTAverage of next50 green dotsEach GREEN DOT:ONE DAY OF TRADING
  • 57. 31BLUE DOTAverage of next50 green dots2Each GREEN DOT:ONE DAY OF TRADING
  • 58. When to BUYMark the areas:Bounce off LinesPenetrate Lines?
  • 59. The Price often “seems touse” the moving averageas a SUPPORT level.minormajor
  • 60. The BLUE Line: 50-period MOVINGAverageif the red line (20-period) is abovethe blue line (50-period), continueto buy the stock.2001,100
  • 61. …Gettingwider?GAPKeep on Buying.? Uhh, I think, it’sexpensive na.Never mind,what you thinkRED LINEAbove?
  • 62. Are you bearish?Are you bullish?You decide, what the outlook isMake your owndecisionsDon’t follow, whatother people do.Other people may not know, where they are going…
  • 63. The moving average,shows the long-termtrend.A “Trend Channel”shows the turningpointsSELLBUY
  • 64. Draw Two Lines, above and below.Connect the Peaks and Valleys.A “Trend Channel”shows the turningpoints
  • 65. Sell at the tops,buy at the bottoms.Trend Channel = turning pointsSELLSELLSELLBUYBUYBUY
  • 66. FREE DOWNLOAD… AMIBROKER.COMFOR PHILIPPINE PRICES: “PSEGET.EXE”Tradingplan
  • 67. Technical Analysis: TOOLS1. Support & Resistance2. Trend Lines, Channels (continuation)3. Reversals: a turning point4. Moving Averages (tool)5. Special Patterns (“formations”)“Movement” : Continuation or Reversal6. Relative Strength Index
  • 68. 81Symmetrical Triangle(Ayala Corp) Chart PatternsCould go, either way: UP or DOWN.
  • 69. 500082Usually Optimistic.Signals a long rally. 3000Where do youthink it is going.Would you BUYshares?Inverted Head and Shoulders(PSEI) Chart Patterns
  • 70. 87“Flag” (How tall)Optimistic. Points toa potential continuation
  • 71. 88“Falling Wedge”(Phil National Bank)A period of watching& waiting: which way?
  • 72. 90“Rising Wedge”(VULCAN Mining)A period of watching& waiting: which way?Which way?
  • 73. 91“Cup and Handle”(ORE)Usually optimistic.Signals an upswing. ImpliesPotential
  • 74. “Double Top” (MEG)92Usually pessimistic.Signals a long decline.Whichway?
  • 75. 93Triple Top (MIC)Usually pessimistic.Signals a long decline.Going upOr DOWN?
  • 76. 95Triple Bottom (GREEN)Usually optimistic.Signals a long uptrend..HighMediumLow
  • 77. Make a Trading PlanStockPrice Reasons“PRO” Reasons“Contra”
  • 78. * At this price, the “STOP order” becomes a “Market Order”“Emergency exit”1.612“Price Target”ENTRY PRICEBUY Stock at 2pesosTRADE = buy low, sell highCut yourLosses 20% below? 30% below?Let yourprofits “run”
  • 79. CheckLong-termChartMostlyUPWARDSMostlyDOWN-WARDS
  • 80. Price isbelow REDLINERed: 20 time periodsBlue: 50 time periodsPrice isABOVE theRED LINEChancesare: …
  • 81. Possiblecontinuationof UPWARDCHANNELZoom into Daily Chart.Check Support & Resistance.Trendlines & Channels.Possible“break ofdownwardchannel”Chancesare: …
  • 82. Trading Plan:BUY MERALCO sharesStockPrice Reasons“PRO” 80% Reasons“Contra” 20%
  • 83. Trading Plan:BUY CEBU PAC sharesStockPrice Reasons“PRO” 50% Reasons“Contra” 50%
  • 84. Technical Analysis: ChartsOther sources:
  • 85. After escaping above the critical Php1.80 resistance last March, MEG hassteadily moved upwards. It eventually reached its minimum upside targetat just above Php2.40 and by the looks of it, MEG may likely continuemoving higher. Its next stop may likely be its previous high at Php2.80 aslong as it continues to track its present uptrend line.
  • 86. Technical Analysis: TOOLS1. Support & Resistance2. Trend Lines, Channels (continuation)3. Reversals: a turning point4. Moving Averages (tool)5. Special Patterns (“formations”)“Movement” : Continuation or Reversal6. Relative Strength Index
  • 87. RSI: oscillator
  • 88. Relative Strength IndexThe relative strength index (RSI) charts the current and historicalstrength or weakness of a stock or market based on the closingprices of a recent trading period. ... momentum oscillator,measuring the velocity and magnitude of directional pricemovements. Momentum is the rate of the rise or fall in price.70%30%“Overbought” : might turn downExtreme levels ... Go back to Middle“Oversold” : might turn upwards
  • 89. RSI = 100 - 100/(1 + RS*)*Where RS = Average of x days up closes / Average of x days down closes.Relative Strength IndexHow strong is this trend,relative to price history?Similar to “Stochastics”
  • 90. RSI is useful in confirming a trend.If RSI is above 50“The market must be movingupwards.”RSI below 50“The market must be movingdownwards.”
  • 91. Relative Strength Index70%30%“Overbought” : might turn downExtreme levels ... Go back to Middle“Oversold” : might turn upwardsThe RSI computes momentum as the ratio of‘higher closes’ to ‘lower closes’: stockswhich have had ...more upward moves ...have a higher RSI than stocks which havemore downward moves.
  • 92. Like many momentum oscillators, overbought and oversold readings for RSI workbest when prices move sideways within a range. Chart 4 shows MEMC Electronics(WFR) trading between 13.5 and 21 from April to September 2009. The stockpeaked soon after RSI reached 70 and bottomed soon after the stock reached 30.? ??70 71 29 71?
  • 93. Technical Analysis: TOOLSSpecial Cases:Seasonality
  • 94. OCTNOVDECOCTNOVDECOCTNOVDECOCTNOVDECOCTNOVDECApr.MayJuneApr.MayJune Apr.MayJuneApr.MayJuneSeasonal ... Cycles... Per Year
  • 95. Tune in ...Everyday onWWW.FIRSTMETROSEC.COM.PH
  • 96. Tune in ...Everyday onWWW.FIRSTMETROSEC.COM.PH
  • 97. Exchange-Traded Fund“EPHE” in NYSE
  • 98. Trading PlanStockPriceObjectivesRisksConstantly changing…%%
  • 99. 127RegularIntervalsFixed amountBUY PLDT,Meralco, GTCapital, JollibeeUntil youhave ___millionworth ofstocks inyouraccount.
  • 100. Investing in EquitiesInvestingversusTrading
  • 101. 1. How to buy stocks, like anexpert: style of “Patient, Long-term” with knowledge,research, and nerves of steel.BUY100200BUYBUYBUY3,000“Investing”
  • 102. BUYTHINKWAITWAIT2. How to buy stocks, like anexpert: style of “Patient,Long-term” withknowledge, research, andmore patience.“Investing”
  • 103. 3. How to buy stocks, like anexpert: style of impatient short-term “maximization”BUYBUYBUYBUYBUYBUYSELLSELLSELLSELLSELL“Trading”
  • 104. Worst-Case: amateur beginner.Buy, when excited.Sell, when depressed.BUYBUYBUYBUYBUYWAITSELLSELLSELLSELL“Emotional”SELL
  • 105. PRICETARGETEmergencyEXITStanding Order,“Good Till Month”
  • 106. PRICETARGETEmergencyEXIT 
  • 107. BUYLOWBUYLOWBUYLOWSELLHIGH255225220
  • 108. BUYLOWBUYLOW.Law..BUYLOW.Dam..255
  • 109. GLOBE TeL1,19273= 16xPLDT2,800212= 14xPLDT gives you more“Earnings” for its high “Price.”Price / ShareEarnings / SharePrice /EarningsRatio Lower “Price / Unit”
  • 110. 38%50%68%100%Fibonacci line retracements
  • 111. 125115100120
  • 112. 125120100 115
  • 113. 1901001307030% + 60 = 90%30% - 60 = 90%30% + / - 60 = ___?
  • 114. 125120100 105