Invbots training materials 20210108 - Technical

1. Technical
Presenter: David Yau, Jim Huang 8 Jan 2021

2. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Brief introduction to simple indicators
• Volume
• Momentum
• Moving Average (MA)
• SMA/ EMA
• Trend of price movement
• Moving Average Convergence Divergence (MACD)
• Strength, direction, momentum, and duration
of a trend
• Relative Strength Index (RSI)
• Current and historical strength or weakness of
a stock

3. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Instagram
#INVBOTS

4. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Parallel channel (swing trade)
• Enter at bottom of the channel
• Exit at the top of the channel
Short term momentum (usually news driven)
•Relatively risky, easy to buy at the top (KODK)
Pennant Pattern
•A converging triangle is developing
•Enter at the breakout point
NYSE: CHWY
NASDAQ: TSLA
HKG: 3800 NYSE: KODK
Different Types of Technical Patterns

5. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
“
”
Cautions for using technical patterns
Random motion of stock price
Changes in stock prices have the same
distribution and are independent of each other
One single signal can be misleading
• Try to use various indicators/ perspectives
/ reasons to back a decision
Set criteria to exit position
• Take profit at 5%
• Stop loss at -5%
• Ref other indicators (MA, MACD, vol, etc.)
NYSE: U
(MACD Golden Cross)

6. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
How to they make buy and sell decision?
• Valuation (P/E,P/B)
• Industry outlook and potential
• Usually buying them when they think the stock is cheap or below their estimated price
• BUY AND HOLD
Is Technical Analysis important to value investor?

7. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Is Technical Analysis important to value investor?
But try not to put all eggs into one basket (all in) at one price when you
think it is cheap because you won’t know if it is really a bottom

8. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Step 1 (Picking Stock through screener)
• Classify the current trend. Prefer uptrend stock. Stock price about all the MA line.
• Analyze different technical indicators: MA MACD RSI Volume
• Find the resistance (previous high) and support level
• Risk to reward ratio (set target price and stop loss price)
Swing Trading Experience Sharing
Example of screening criteira
Stock Price: >=1
Market Capital(10million): >=10
All-time High: 10-D New High
MA: Price > MA 50
MA: Price > MA 250

9. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Step 2
• Drawing trend line,
define the support
level and resistance
level.
When to enter?
• Stock breakthrough
with large volume
with historical high
Swing Trading Experience Sharing
Converging Triangle Cup & Handle
First Entry

10. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Upward channel and breakout
1 2 3

11. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Special case (False Signal)

12. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
False signal by our traders

13. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
False signal by our traders

14. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Discussion of technical trend
https://docs.google.com/forms/d/e/1
FAIpQLScUEca9fyEp4xeSVlvayw5mlYt7
tYwC2CctKBHUSX_DBAhJZw/viewform

15. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Discussion of technical trend
HKEX:1579

16. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Discussion of technical trend
HKEX:175

17. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Discussion of technical trend
HKEX:941

18. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Discussion of technical trend
NASDAQ:EXPI

19. M a c ro S t ra t e g y | F u n d a m e n t a l | Te c h n i c a l | |
P o r t fo l i o M a n a g e m e n t
+ B a c k t e s t i n g
Tra d i n g S t ra t e g y
( p s yc h o l o g y )
Survey result
Short-term MA crossing long-term
Bollinger Band expansion/contraction/breakout
Market emotion

20. Appendix – Volume
• Daily volume
• Average volume MAVOL

21. Appendix – MA (Moving Average)
• Simple Moving Average –
Average of close for n days
• Exponential Moving Average –
taken weighting of time into
account
• Represents short-term and long-
term trend of stock movement

22. Appendix – MACD
(Moving Average Convergence Divergence)
• DIF = EMA12 − EMA26
• DEA = EMA9 of DIF
• Histogram = DIF-DEA
• Golden cross
• DIF crosses up DEA
• Death cross
• DIF crosses down DEA

23. Appendix – RSI
(Relative Strength Index)
• !"# = 100 −
!""
!#
!"!#$ %#&'/'
!"!#$ $"))/'
• RS =
$%$&' (&)*/*
$%$&' '%,,/*
• Standard n = 14.
• An asset is usually considered
overbought when the RSI is
above 70% and oversold when it
is below 30%.