Technical Analysis

1. Prepared by
Group 4
Victoria Joreen Evangelio
Suzhijiang (Enzo)
Lianbingfa (Gavin)
Technical Analysis

2. Matters on the Docket
A brief look at what we will discuss on this report
Technical Analysis Strategies
Technical Analysis: Defined and Explained
01
04
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Technical Analysis in Stock Market
Objectives of Technical Analysis
Purpose of Performing Technical Analysis
Methods to Perform Technical Analysis

3. Technical
Analysis
It is a trading discipline employed to evaluate
investments and identify trading
opportunities in price trends and patterns
seen on charts.
It is the study of historical market data,
including price and volume. Using insights
from market psychology, behavioral
economics, and quantitative analysis,
technical analysts aim to use past
performance to predict future market
behavior.
It is a great used for forecasting future
process and trends for short term investors.

4. Technical Analysis
Price action also tends to repeat itself because
investors collectively tend toward patterned
behavior -- hence technician's focus on identifiable
trends and conditions.
To simply put, it is the study of
charts, graphs and stock
market's history, in an attempt to
determine it's future.

5. Objectives
of Technical Analysis
When this is understood, choosing a
trading style strategy for that market
condition is simple.
To accurately determine
the current Market
Condition
To determine long term analysis
cycles of the business, whether those
cycles are intact of in severe deviation
patterns, the average duration and
etc.
This helps determine
where the company is, in
its business cycle.

6. Objectives
of Technical Analysis
To analyze Industry and Sector cycles
to find the strongest industries or
sectors for optimizing and focusing on
the highest growth potential industries
for the coming year and subsequent
years.
To identify which industries
have the highest number of
quality stocks that lead
their industry
There are different market participant
groups that all 3 data sets. Selecting
one for that market condition or
selecting one that provides the lowest
risk versus highest profit potential for
trading is taught.
Selection of which market
group the trader intends to
trade with and which
groups to avoid

7. Objectives
of Technical Analysis
This information can be studied, and
provide excellent data set information
for decisions within the daily activity
when needed.
Technical Patterns reveal
enormous amounts of
information about the
current trading conditions
Many patterns are in the Relational
Technical Analysis studies. With this
knowledge and the skill to use this
information correctly, a trader can
trade almost any market condition and
trading condition successfully.
Lowering Risk is a huge
aspect of technical
analysis

8. The trend is the direction of the
market, in technical analysis trends
are identified by trend line connecting
the high and lows form by price during
it move in a trend
Identify
Trend
Purpose of Performing
Technical Analysis of Stocks
Movement of the stock indicates the
speed of price change in the stock.
Momentum shows the rate of change
of price over a defined period helps
the trader to define the strength of the
move.
Movement

9. refers to the price at which a trader in
punching buys or sell order, in trading
timing an entry is everything, price
alone can’t help in timing but the
technical analysis does, it guides us
through different support and
resistance value.
Entry
Purpose of Performing
Technical Analysis of Stocks
It allows us to minimize the loss, by
properly knowing the nearby support
and resistance zone we can place our
stop-loss order at the right price so
that if we are wrong in our analysis our
stop loss will prevent the dropdown in
our capital.
Reduce Loss

10. There is a saying in the market
“knowing when to exit is more
important than then when to entry”, so
before entering a trade it is more
important for you to define your exit
level in advance.
Target
Purpose of Performing
Technical Analysis of Stocks
It prevents the false trade, technical of
a stock helps us to locate the support
and resistance zone, so by
understanding the zone in which the
price is, you can trade accordingly or
at least we will not short a share near
a support zone, or buy a share near a
resistance
False Trade

11. Technical
Analysis in
Stock Market
Technicians say that a market's price
reflects all relevant information, so their
analysis looks at the history of a
security's trading pattern rather than
external drivers such as economic,
fundamental and news events.
Technical analysis determines
trends and tries to take
advantage of them

20. Methods to Perform
Technical Analysis
Technical indicators are used by
traders to gain insight into the
supply and demand of securities
and market psychology.
Together, these indicators form
the basis of technical analysis.
Metrics, such as trading volume,
provide clues as to whether a
price move will continue. In this
way, indicators can be used to
generate buy and sell signals.

21. Technical indicators that use the same
scale as prices are plotted over the top
of the prices on a stock chart.
Overlays
Rather than being overlayed on a price
chart, technical indicators that oscillate
between a local minimum and maximum
are plotted above or below a price chart
Oscillators
Tools of the Trade
The tools of the trade for day
traders and technical analysts
consist of charting tools that
generate signals to buy or sell, or
which indicate trends or patterns
in the market. Broadly speaking,
there are two basic types of
technical indicators:

22. On-Balance
Volume
We use the on-balance volume indicator
(OBV) to measure the positive and
negative flow of volume in a security
over time.
When OBV is rising, it shows that buyers are
willing to step in and push the price higher.
When OBV is falling, the selling volume is
outpacing buying volume, which indicates
lower prices. In this way, it acts like a trend
confirmation tool. If price and OBV are rising,
that helps indicate a continuation of the
trend.
Traders who use OBV also watch for
divergence. This occurs when the indicator
and price are going in different directions. If
the price is rising but OBV is falling, that
could indicate that the trend is not backed by
strong buyers and could soon reverse.

24. Accumulation/
Distribution
Line
One of the most commonly used
indicators to determine the money flow
in and out of a security is the
accumulation/distribution line (A/D line).
It is similar to the on-balance volume
indicator (OBV), but instead of considering
only the closing price of the security for the
period, it also takes into account the trading
range for the period and where the close is in
relation to that range. If a stock finishes near
its high, the indicator gives volume more
weight than if it closes near the midpoint of
its range. The different calculations mean
that OBV will work better in some cases and
A/D will work better in others.
If the indicator line is trending up, it shows
buying interest, since the stock is closing
above the halfway point of the range. This
helps confirm an uptrend. On the other hand,
if A/D is falling, that means the price is
finishing in the lower portion of its daily
range, and thus volume is considered
negative. This helps confirm a downtrend.

26. Average
Directional
Index
It is a trend indicator used to measure
the strength and momentum of a trend.
When the ADX is above 40, the trend is
considered to have a lot of directional
strength, either up or down, depending
on the direction the price is moving.
ADX above 20 and DI+ above DI-: That's
an uptrend.
ADX above 20 and DI- above DI+: That's a
downtrend.
ADX below 20 is a weak trend or ranging
period, often associated with the DI- and
DI+ rapidly crisscrossing each other.
The ADX is the main line on the indicator,
usually colored black. There are two
additional lines that can be optionally shown.
These are DI+ and DI-. These lines are often
colored red and green, respectively. All three
lines work together to show the direction of
the trend as well as the momentum of the
trend.

28. Aroon
Indicator
It is a technical indicator used to
measure whether a security is in a trend,
and more specifically if the price is
hitting new highs or lows over the
calculation period (typically 25).
When the Aroon-up crosses above the
Aroon-down, that is the first sign of a
possible trend change. If the Aroon-up hits
100 and stays relatively close to that level
while the Aroon-down stays near zero, that is
positive confirmation of an uptrend.
The reverse is also true. If Aroon-down
crosses above Aroon-up and stays near 100,
this indicates that the downtrend is in force.

30. MACD
The moving average convergence
divergence (MACD) indicator helps
traders see the trend direction, as well as
the momentum of that trend. It also
provides a number of trade signals.
When the MACD is above zero, the price
is in an upward phase. If the MACD is
below zero, it has entered a bearish
period.
The indicator is composed of two lines: the
MACD line and a signal line, which moves
slower. When MACD crosses below the signal
line, it indicates that the price is falling. When
the MACD line crosses above the signal line,
the price is rising.
Looking at which side of zero the indicator is
on aids in determining which signals to follow.
For example, if the indicator is above zero,
watch for the MACD to cross above the
signal line to buy. If the MACD is below zero,
the MACD crossing below the signal line may
provide the signal for a possible short trade.

32. Relative
Strength
Index
(RSI) has at least three major uses. The
indicator moves between zero and 100,
plotting recent price gains versus recent
price losses. The RSI levels therefore
help in gauging momentum and trend
strength.
The most basic use of an RSI is as an
overbought and oversold indicator. When RSI
moves above 70, the asset is considered
overbought and could decline. When the RSI
is below 30, the asset is oversold and could
rally. However, making this assumption is
dangerous; therefore, some traders wait for
the indicator to rise above 70 and then drop
below before selling, or drop below 30 and
then rise back above before buying.
Divergence is another use of the RSI. When
the indicator is moving in a different direction
than the price, it shows that the current price
trend is weakening and could soon reverse.

34. Stochastic
Oscillator
It is an indicator that measures the
current price relative to the price range
over a number of periods. Plotted
between zero and 100, the idea is that,
when the trend is up, the price should be
making new highs. In a downtrend, the
price tends to make new lows.
The stochastic moves up and down relatively
quickly as it is rare for the price to make
continual highs, keeping the stochastic near,
100 or continual lows, keeping the stochastic
near zero. Therefore, the stochastic is often
used as an overbought and oversold
indicator. Values above 80 are considered
overbought, while levels below 20 are
considered oversold.

36. Technical Analysis
Strategies
(Choosing the Right Approach)
There are generally two
different ways to approach
technical analysis: the top-down
approach and the bottom-up
approach. Often, short-term
traders will take a top-down
approach and long-term
investors will take a bottom-up
approach. In addition to this,
there are five core steps to
getting started with technical
analysis.

37. The top-down
approach is a
macroeconomic
analysis that looks at
the overall economy
before focusing on
individual securities. A
trader would first
focus on economies,
then sectors, and then
companies in the case
of stocks.
The bottom-up
approach focuses on
individual stocks as
opposed to a
macroeconomic view.
It involves analyzing a
stock that appears
fundamentally
interesting for
potential entry and
exit points.
Top-Down Bottom-Up

38. Five Core Steps to get start with
Technical Analysis
01 02 03 04 05
Pick a Strategy
or Develop a
Trading System
Identify
Securities
Find the Right
Brokerage
Track and
Monitor Trades
Use Additional
Software or
Tools

39. Thank you!
Sources:
TECHNICAL ANALYSIS PART 1 -
ppt download (slideplayer.com)
Top 7 Technical Analysis Tools
(investopedia.com)
What are the main objectives of
technical analysis? - Quora
Technical Analysis for Stocks:
Beginners Overview
(investopedia.com)