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Introduction to Technical Analysis: Key Concepts & Strategies

Learn the fundamentals of technical analysis, including moving averages, support and resistance, Fibonacci retracements, and more. Discover how this approach can enhance your trading decisions across various markets.

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Introduction to Technical Analysis: Key Concepts & Strategies

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  1. Introductory Technical Analysis “To trade successfully, think like a fundamentalist; trade like a technician. It is imperative that we understand the fundamentals driving a trade, but also that we understand the market’s technicals. When we do, then, and only then, can we or should we, trade.” - Dennis Gartman Doug Scarpelli

  2. What is technical analysis? • The study of market/stock action that utilizes charts displaying price patterns and volume. These charts and the indicators applied offer predictive price movements and trends. • It attempts to explain price action based on market psychology. • Can be applied to all time frames from 5 minute charts to monthly charts and beyond. • Benefits of technical analysis: • More efficient/ lucrative for entries and exits • When paired with solid fundamental analysis, can help identify better opportunities • Technical's may change before the fundamentals, and vice versa • Get on board with the big players • Useful for equities, commodities, currencies, etc. • Help forecast price action for equity options

  3. Moving Averages • Investopedia says: An Indicator used in technical analysis showing the average value of a security's price over a set period. • Measure momentum • Define support and resistance levels • MA crossovers • Important MA to long-term trends: • 50, 100, 200 • Prices tend to gravitate towards their MA’s (typically) • Simple moving average SMA • Exponential moving average EMA • One caution! • A 20 SMA is not the same on a 60 minute chart as a daily chart, or and MA or any time frame.

  4. Weekly chart: QQQQ

  5. Support & Resistance • Investopedia explains support as: The price which, historically, a stock has had difficulty falling below. It is thought of as the level which a lot of buyers tend to enter the stock. • Resistance: The stock or market stops rising because sellers start to outnumber buyers. • Applying support & resistance • Moving averages • Trend lines • Channels • Can be used with almost any indicator • Directional support & resistance • Advancing • Declining • Horizontal

  6. FMBI- Horizontal Channel

  7. EUR/USD- Advancing Channel with key S/R levels

  8. Fibonacci Retracements • Named after Leonardo Fibonacci , a thirteenth-century mathematician • The “Fibonacci numbers” a sequence of numbers where each successive number is the sum of the previous two. • 1,1,2,3,5,8,13,21,34,55,89,144, etc. • Each number is approximately 1.618 the previous number • Important ratios are: 0%, 23.6%, 38.2%, 50%, 61.8%, and 100% • The most popular studies are retracements, fans, arcs, and time zones • Retracements can be vary useful for • Entries, exits • Targets • Stops

  9. Will we see U.S. Steel fall?

  10. Will we see Autozone bounce back up?

  11. Resources • Best Interactive Resources • www.freestockcharts.com • www.stockcharts.com (sharpcharts) • www.finviz.com • Bloomberg Terminal (Business Library) • Also Try… • Google Finance • Yahoo! Finance • You can always print out a chart and manually add studies/ trend lines, like the old days!

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