Chart	
  Trend	
  Comparison	
  
	
  
I	
  like	
  to	
  keep	
  things	
  simple,	
  and	
  that	
  definitely	
  holds	
...
 
	
  
In	
  this	
  specific	
  oil	
  example,	
  you	
  will	
  notice	
  some	
  equities	
  that	
  were	
  at	
  its...
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Chart trend comparison

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A simple technique to trade stocks by simply comparing two different stocks.

http://thewildinvestor.com

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Chart trend comparison

  1. 1. Chart  Trend  Comparison     I  like  to  keep  things  simple,  and  that  definitely  holds  true  in  the  world  of  stock  trading,  and   since  I  am  a  pure  technical  analyst  that  makes  the  process  even  simpler.  For  the  most  part,  I   use  screeners,  such  as  the  one  inside  MarketClub,  to  shift  through  possible  stocks  to  play.   Yeah,  sure  it  works  time  from  time,  but  even  that  is  a  little  too  much  work  for  me.  Luckily,  I   found  a  strategy  that  a  third  grader  could  even  follow.     If  you  are  familiar  with  the  financial  market,  then  you  know  there  are  tickers  for  individual   stocks  and  then  tickers  for  indexes  of  various  markets,  sectors,  commodities,  and  so  on.  In   continuing,  a  certain  price  of  a  commodity  usually  tends  to  effect  related  companies.  A   quick  example  of  this  is  the  relationship  between  the  price  of  oil  and  drilling  companies  or   the  price  of  oil  and  airlines.       Basically,  the  change  in  one  entity  alters  the  outcome  of  another,  and  this  is  the  strategy  we   will  use.     All  we  need  to  do  is  find  two  symbols:  an  index  (i.e.  price  of  oil)  and  a  stock  that  depends  on   the  price  of  that  index.  With  these  two  ticker  symbols,  plug  them  into  your  charting   platform  and  see  how  they  correlate.  What  happens  to  the  stock  when  the  price  of  that   index  goes  up  or  down?  I  recommend  testing  a  couple  different  time  frames.  If  the  patterns   hold  for  a  couple  years,  then  you  know  you’re  on  the  right  track.        
  2. 2.     In  this  specific  oil  example,  you  will  notice  some  equities  that  were  at  its  peak  when  oil  was   around  $140,  retreated  as  oil  hit  new  bottoms,  and  now  slowly  rounding  out.  In  other   words,  you  can  clearly  see  the  correlation  between  the  two  entities.  From  this  particular   analysis,  a  good  conclusion  is  that  we  need  oil  to  hit  this  price  for  the  stock  to  hit  this  price.       If  this  is  your  first  exposure  to  this  type  of  strategy,  then  it  may  seem  a  little  off  to  you;   however,  take  a  look  at  a  couple  tickers  and  you’d  be  surprised  how  accurate  these  prices   move  in  tandem.  It  sort  of  resembles  pair  trading.  With  oil  eagerly  wanting  to  move  higher,   now  is  a  great  time  to  try  and  find  dependent  companies  that  have  been  beating  up  by   lower  prices  and  ready  to  burst  higher.  

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