Technical Analysis (Long) With Thomson Reuters Edit

TECHNICAL ANALYSIS
Charting Techniques
by Leo Quinitio
www.pse.com.ph
Random Walk Theory

Author Burton Malkiel "A Random Walk Down Wall Street top-seller finance book
Stock price changes have the same distribution and are independent of each other, so the past movement or trend of a stock price or market cannot be used to predict its future movement.
Followers think that the market cannot be outperformed without assuming additional risk.
Critics say stocks actually form trends at length and it is possible to beat the market through careful study of buying & selling points.
Efficient Market Hypothesis

It is impossible to "beat the market" because stock market efficiency causes existing share prices to always incorporate and reflect all relevant information.
Stocks always trade at their fair value on stock exchanges, making it impossible for investors to either purchase undervalued stocks or sell stocks for inflated prices. It is impossible to outperform the overall market through expert stock selection or market timing, and that the only way an investor can possibly obtain higher returns is by purchasing riskier investments.
Efficient Market Hypothesis

A cornerstone of modern financial theory Believers argue it is pointless to search for undervalued stocks or to try to predict trends in the market through either fundamental or technical analysis. Warren Buffett has consistently beaten the market over long periods of time, which by EMH is impossible
The 1987 stock market crash when the Dow Jones Industrial Average (DJIA) fell by over 20% in a single day, is evidence that stock prices can seriously deviate from their fair values.
Balance Sheet
Solvency Ratio
FUNDAMENTAL ANALYSIS
Cash Flows
TECHNICAL ANALYSIS
INVESTMENT ANALYSIS Fundamental Analysis Technical Analysis
Method of forecasting future price movements of a security based on political, environmental & other factors
Study of past market data such as prices + volume = predict future price movements (I.e. stocks/markets)
Traditional economic + Business concepts = value of investment
Examination of the above variables is called Valuation process
Proponents believe that the markets judgment of an issues fundamentals are determined by supply and demand variables that are already reflected in prices.
INVESTMENT ANALYSIS Fundamental Analysis

View from financial statements
Technical Analysis
View from charts
Best employed for long term investing
Best employed for short term trading
Data utilized come out periodically Tends to focus on a specific sector
Data utilized come out daily
Focused on what must happen
Focused on what happens
VALUATION PROCESS Fundamental Analysis Technical Analysis
Top Down Approach
Bottom-up Approach
Considers condition affecting
Economy
Financial Markets
Industry
Company
VALUATION PROCESS Fundamental Analysis Technical Analysis
Works best if all investors are logical and could separate emotions from investment decision
Will succeed if the analyst finds overlooked data in identifying undervalued securities
Works best in determining market sentiment and factor it in the creation of investment or trading decisions
EXPECTATIONS Should I buy today? What will the prices be tomorrow, next week or next year?
DONT AIM TO PREDICT PRICES CONSISTENTLY & ACCURATELY
Technical analysis is the answer!?
NO!
YES!
AIM TO REDUCE RISKS & IMPROVE PROFITS
Technical Analysis will improve investing? Make sensible investment decisions
DEFINITION
The study of prices, with charts as the primary tool.
A method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volume.
DEFINITION
Once viewed as arcane or mystical but today it is part of every major investment or trading decision. Evolving quickly such that techniques today may be rendered incomplete or obsolete tomorrow.
Used as the basis for automated trading.
ADVANTAGES
Portability Price based trade or investment planning
Does not require knowledge of many mathematical formulas
DISADVANTAGES
May not be used to predict future price action
Not easy to use with IPOs May miss 20-25% of the movement It has a tendency to create self fulfilling prophecies Subjectivity
A chart is a picture A picture is worth a thousand words or probably a thousand dollars
Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts to identify patterns that can suggest future activity.
Technical analysts believe that the historical performance of stocks and markets are indications of future performance.
Equally applicable on any security or tradable financial instrument (stocks, bonds, commodities, futures, indices, mutual fund, options)
In a shopping mall
Fundamental analyst: will go to each store, study the product and then decide whether to buy it or not
Technical analyst: will watch people go into the stores. Decision would be based on the patterns or activity of people going into each store.
HUMAN ELEMENT Humans are not easily quantifiable nor predictable

Many investment decisions are based on irrelevant criteria The price of a security is a consensus of at least two humans
The price depends on human expectations
HUMAN ELEMENT The breadth of market participants guarantees an element of unpredictability and excitement
Why Do Prices Fluctuate?
MARKET PSYCHOLOGY
Each investors would have his or her own opinion about a certain security or any other object for that matter
MARKET PSYCHOLOGY THE PRICE IS RIGHT GAME
cellphone
Cellphone
Five years depreciated
Cellphone
previously owned by Hayden Kho
MARKET PSYCHOLOGY MY CHOICE GAME
Designer shoes
Designer shoes
Designer shoes
Designer shoes
Designer bags
PRACTICAL MARKET PSYCHOLOGY

Logical: buyers want to buy at the lowest price possible
Competitive: buyers raise their bids in order to attract sellers
Emotional: buyers tend to be euphoric when price increases
PRACTICAL MARKET PSYCHOLOGY

Logical: sellers want to sell at the highest price possible
Competitive: sellers tend to lower their offer price in order to attract buyers
Emotional: sellers tend to panic when price drops
MARKET CYCLE
High price will urge sellers to cash-in
Euphoria sets in
More sellers compete to attract buyers

Panic sets in
Price becomes too cheap to be ignored by buyers
News of increasing price spreads, price gains momentum
More buyers compete to attract sellers
MARKET CYCLE
Distribution
BASIC ASSUMPTIONS
1. The market discounts everything
2. Price moves in trends 3. History tends to repeat itself
ORIGINS
Dow Jones Theory 1890
Basic Principles of Dow Theory: 1. Averages discount everything 2. Market trends [primary (tide), intermediate or secondary (waves), tertiary (ripples)] 3. Bull and bear markets 4. Lines (tight sideways band) 5. Averages must confirm 6. A trend continues until it is reversed 7. Volume goes with trend
EVOLUTION (WEST)
Dow Theory 1890s
Elliot Wave 1938
Classical Charting
EVOLUTION (EAST)
Japanese Charting 1800s (Meiji Period) Kagi 1870s Candlesticks
Renko
Equivolume
Ichimoku
Heikin-Ashi
ELLIOT WAVE
Ralph Nelson Elliot
The Wave Principle published in 1938
Based on Fibonacci ratios golden ratio = Nature's Law The Secret of the Universe
ELLIOT WAVE
New out
More people join

Consolidation Profit taking Bargain hunting
ELLIOT WAVE
Excess Distribution
Big move
Big move
Despair
Accumulation
ELLIOT WAVE
short or truncated
corrective
impulse
Top of wave 1
biggest wave
Below bottom of wave 4
ELLIOT WAVE
The Elliott Wave Principle does not provide certainty about any one market outcome. Instead, it gives you an objective means of determining the probability of a future direction for the market.
CLASSICAL CHARTING
Chart Composition
Chart Types Chart Trend Channels Chart Patterns & Formations
Chart Indicators & Oscillators
CHART COMPOSITION Price Fields

Open - The first price traded for the period. An important consensus as all interested parties were able to sleep on it. High - The highest price traded for the period. The point where there were more sellers than buyers.
Low - The lowest price traded for the period. The point where there were more buyers that sellers.
Close The last price traded for the period. Most often used price for analysis. The relationship of the open and close prices is considered most significant by technicians.
CHART COMPOSITION Price Fields
Volume The number of shares traded during the period. Bid The price a buyer is willing to pay Ask The price a seller is willing to accept
CHART COMPOSITION Axis
Y= price X= time
Price range Time line
CHART COMPOSITION Grid Scaling
Arithmetic (or Linear)
Semi Logarithmic
Arithmetic Scaling
Semi-log Scaling
CHART TYPES
Line Chart
CHART TYPES
high low
Pole Chart
CHART TYPES
Bar Chart
CHART TYPES
DAY 1 DAY 2 DAY 3 DAY 4 DAY 5 DAY 6 DAY 7 DAY 8 DAY 9 DAY 10 DAY 11 DAY 12 DAY 13 DAY 14 DAY 15 DAY 16 DAY 17 DAY 18 DAY 19 DAY 20 OPEN 6.00 6.00 5.90 5.80 5.90 5.90 6.00 6.10 6.30 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.80 6.80 PCOR HIGH LOW 6.00 6.00 6.00 5.90 5.90 5.90 5.90 5.80 5.90 5.80 6.00 5.90 6.10 6.00 6.10 6.00 6.70 6.30 6.80 6.60 6.70 6.60 6.80 6.70 6.70 6.60 6.70 6.70 6.80 6.70 6.70 6.70 6.80 6.70 6.80 6.70 6.80 6.80 6.70 6.70 CLOSE 6.00 6.00 5.90 5.90 5.90 6.00 6.00 6.00 6.60 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70 6.70
Bar Chart Plotting Exercise
CHART TYPES
Bar Chart Plotting Exercise
CHART TYPES
Point & Figure Chart
CHART TYPES
EDC CLOSE 5.20 5.10 5.00 4.90 4.80 5.00 5.20 5.20 5.30 5.40 5.40 5.40 5.40 5.60 5.20 5.20 5.20 5.40 5.30 5.20
Point & Figure Chart Plotting Exercise
CHART TYPES
5.60 5.50 5.40 5.30 5.20 5.10 5.00 4.90 4.80
x x x x x xo oxoxo ox ox o x o
5.6 5.5 5.4 5.3 5.2 5.1 5.0 4.9 4.8
X X X X X XO OXOXO OX OX O O
Point & Figure Chart Plotting Exercise
CHART TYPES
Candlestick Chart
CHART TYPES
DAY 1 DAY2 DAY 3 DAY 4 DAY 5 DAY 6 DAY 7 DAY 8 DAY 9 DAY 10 DAY 11 DAY 12 DAY 13 DAY 14 DAY 15 DAY 16 DAY 17 DAY 18 DAY 19 DAY 20 4.95 4.95 4.85 5.10 5.20 5.20 5.30 5.20 5.40 5.50 5.30 5.30 5.10 5.00 5.50 5.20 4.95 4.90 4.80 4.90 4.95 5.00 5.10 5.20 5.30 5.40 5.50 5.40 5.50 5.50 5.60 5.40 5.30 5.30 5.60 5.20 5.00 5.00 4.85 4.95 4.90 4.80 4.85 5.00 5.10 5.20 5.30 5.20 5.30 5.30 5.30 5.20 5.10 4.95 5.40 5.00 4.90 4.90 4.80 4.80 4.90 4.80 5.00 5.20 5.20 5.30 5.40 5.40 5.40 5.40 5.60 5.20 5.20 5.20 5.40 5.10 4.95 4.95 4.80 4.85
Candlestick Chart Plotting Exercise
CHART TYPES
Candlestick Chart Plotting Exercise
CHART TYPES
volume
Equivolume Chart
CHART TYPES
Modified Formula xClose = (Open+High+Low+Close)/4 o Average price of the current bar
xOpen = [xOpen(Previous Bar) + Close(Previous Bar)]/2 o Midpoint of the previous bar
xHigh = Max(High, xOpen, xClose) o Highest value in the set
xLow = Min(Low, xOpen, xClose) o Lowest value in the set
Heikin-Ashi (average bar) Chart
CHART TYPES
Candlestick converted to Heikin-Ashi
Heikin-Ashi (average bar) Chart
CHART TYPES
high
high
close
open
close
open
low
low
Anchor Chart
CHART TYPES
Thick lines are drawn when price breaks above the previous high price (>4%) and is interpreted as an increase in demand Thin lines are used to represent increased supply when the price falls below (>4%) the previous low
Kagi (Focus) Chart
CHART TYPES
Constructed by placing a brick in the next column once the price surpasses the top or bottom of the previous brick by a predefined amount
Renko (brick) Chart
CHART TRENDS CHANNELS & LINES

Plotting Support & Resistance

Establishing Trends (channels & range)

Establishing Trends (channels & range)
The more times a trend line is tested, the more significant it becomes

Trend Acceleration or Deceleration
Angle of trends:
Weak Healthy Overheated

When support is broken, it becomes the new resistance

When resistance is broken, it becomes the new support

Identifying trends, breakouts & breakdowns
Trend Plotting Exercise

Historical support and resistance
Historical Support & Resistance Plotting Exercise



Retracements & Reversals
Obtained by drawing a trendline between two extreme points and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 100%

Retracements & Reversals
Fibonacci Numbers
1, 1, 2, 3, 5, 8, 13, 21, 34, 55, 89, 144, etc
Any given number is approximately 1.618 times the preceding number
Each Fibonacci number is approximately 62% of the next higher number. 38 is the inverse of 62

Fanlines
100%
62% 50% 38%
0%
Retracement & Reversal Plotting Exercise

Arcs
100%
62% 50% 38%
0%

Pitch Forks
tines
handle X
tines
CHART PATTERNS & FORMATIONS

Reversal Patterns
Rounding Bottom
Saucer Top

Reversal Patterns
Double Bottom
Double Top

Reversal Patterns
Triple/multiple Bottom
Triple/multiple Top

Reversal Patterns
Reverse Head & Shoulders
Head & Shoulders

Reversal Patterns
Spike Bottom
Spike Top

Continuation Patterns
Rising Tops
Falling Tops

Neutral Patterns
Usually accompanied by decreasing volume
Wedge/Symmetrical Triangle

Neutral Patterns
Ascending & Descending Triangles
Broadening (Megaphone) Formation

Flags & pennants

Flags & pennants

Flags & pennants

Candlestick Continuation Patterns
Three White Soldiers Three Black Crows

Candlestick Reversal Patterns
Bullish Engulfing Bearish Engulfing

Bullish Harami Bearish Harami

Doji Star Dark Cloud Cover

Candlestick Reversal Pattern
Morning Star

Candlestick Nuetral Patterns
Sushi Roll

Continuation & Exhaustion Gaps
Exhaustion gap Runaway (or measuring) gaps

Breakaway gap

Continuation & Exhaustion Gaps
Island Reversal
EXERCISE
EXERCISE
EXERCISE
EXERCISE
VOLUME HISTOGRAMS
Volume spikes may indicate large scale entry or exit of money
VOLUME HISTOGRAMS
Steep price increases not supported by volume are usually dangerous
CHART INDICATORS & OSCILLATORS
Indicators are essentially calculations based on the price and the volume of a security and measures factors such as money flow, trends, volatility and momentum

Indicators are used as a measure to gain further insight into to the supply and demand of securities
Also used to confirm price movement and the probability that the given move will continue
Can also be used as a basis for trading as they can form buyand-sell signals
Oscillators = indicators that are plotted within a bounded range fluctuate into overbought and oversold conditions based on set levels based on the specific oscillator usually 30 and 70

Leading Lagging
Confirmatory, more useful during trending periods
Predictive, strongest during periods of sideways or nontrending trading ranges
Users need to be careful to make sure the indicator is heading in the same direction as the trend
Better to have less entry and exit points

Usually gives late entry and exit points
Many buy and sell signals that make it better for choppy nontrending markets
Leading indicators are those created to proceed the price movements of a security giving predictive qualities.
Two of the most well-known leading indicators are the Relative Strength Index (RSI) and the Stochastics Oscillator

Stochastic Oscillator
The Stochastic Oscillator compares where a securitys price closed relative to its price range over a given time period.
Graphic Representation
%K Line = main line (solid line) %D Line = moving average of %K Line (dotted line)
Variables %K Periods = time period used in calculation
%D Periods = time period used in calculating moving average

Todays Close - Lowest Low in %K Periods x 100 Highest High in %K Periods - Lowest Low in %K Periods
37.5 =
41 - 38
46 - 38 x 100

Interpretation:
Buy when %K or %D lines fall below oversold level Sell when %K or %D lines rise above overbought level
Buy when %K line rises above %D line Sell when %K line falls below %D line
Look for divergences


Negative divergence

Positive divergence

Lagging indicators are those that follows price movements and have less predictive qualities Well-known lagging indicators are the moving averages, Bollinger bands and MACD
Useful during trending periods but not during non-trending periods Tend to focus more on the trend and produce fewer buy-and-sell signals

This indicator is comprised of two moving averages, which help to measure momentum in the security
MACD = shorter term moving average - longer term moving average
Signal line = 9-day exponential moving average
Indicators are used to form buy and sell signals are through crossovers and divergence Indicators are also used through divergence, which occurs when the direction of the price trend and the direction of the indicator trend are moving in the opposite direction Two types of divergence - positive and negative. Positive divergence occurs when the indicator is trending upward while the security is trending downward

When to use what indicator/oscillator?
Study the Directional Movement Indicator (DMI)
1978 J. Welles Wilder Measures the strength of a prevailing trend or whether movement exists in the market + DI; - DI; 14 ADX trading days
Monetary Indicators - provide insights on external monetary conditions affecting a securitys price. These basically deal with economic information such as interest rates, money supply, corporate debt, inflation, GNP, GDP etc. tells us what security prices should do.
Sentiment Indicators - are studies on investor expectations based on price. In large markets, studies may be done on odd lot boards, the number of call/put ratios, premium on stock index futures, bull/bear ratio. Tells us what investors expect prices to do.
Momentum Indicators - are deeper studies on price such as price/volume indicators, breadth index.Tells us what prices are actually doing.
BLENDING TECHNICAL & FUNDAMENTAL ANALYSIS (also INTERMARKET ANALYSIS)

TA may confirm a FA finding
FA is useful in identifying which security to invest in
TA is useful for timing the investment

Volume trends give additional insights to your research Tracking short term movements
Tracking reactions over time
DISADVANTAGES OF BLENDING
It's History! A simple chart cannot provide the investor with crucial longterm fundamental information such as the future direction of cash flows or earnings per share.
The Crowd is Sometimes Wrong It is possible that a stock that's being accumulated en masse this week may be under heavy distribution the next. Conversely, stocks that are being heavily sold this week may be under accumulation in the weeks to come.
Charts Don't Typically or Consistently Forecast Macro Trends Charts also are generally unable to accurately forecast macroeconomic trends. Example, it is nearly impossible to look at a major player in the oil and gas sector and decipher definitively whether OPEC intends to increase the amount of oil it pumps, or whether a fire that just started at a shipping facility in Venezuela will affect near-term supplies.
There is Subjectivity When it comes to reading a chart, a certain amount of subjectivity comes into play. Some may see a chart and feel that a stock is basing, while another person might see it and conclude that there is still more downside to be had.
EXAMPLES OF BLENDING
IMPROVED TRADING/INVESTING Creating a System

Information reaches you
Check fundamentals of the security

Look at the chart, start with the big picture
Try to relate known incidents w/ price action

Make references for current prices vs historical price Zoom in to current price performance
Identify trends, patterns currently affecting price movement

Check volume histogram & choice indicator/s Compute risk vs. reward Draw a strategy: how much to invest & when to enter/exit Manage your strategy
TECHNICAL REPORTING
THE TECHNICAL JABBER
HEADER: .Name of Stock .Type of Chart (line, bar, candlestick, equivolume, etc.) .Indicators/oscillators used (stochastics, SMA, EMA, RSI, MACD) .Volume window (simple or with histogram) Optional:
.Overlays .Author CHART IMAGE (Single, double or triple window)

SUMMARY RECOMMENDATION: (hard or soft buy, sell, hold, combination, other strategies)
TECHNICAL REPORTING
BODY
Big Picture .Historical overview (general observation) .Study of major trends .Study of fan lines and retracements .Study of patterns .Study of volume .Study of indicators/oscillators (positive or negative convergence, divergence, overbought or oversold levels, positions, configurations)
TECHNICAL REPORTING
TAIL
Close up .Current trend .Confirmatory or predictive configurations Prognosis .Possible scenarios (probable, adverse) .Strategic recommendations (medium to long term activity) .Tactical recommendations (short to medium term activity) .Accumulation or distribution points
SOURCES OF CHARTS IN THE PHILIPPINES:

The PSE Website: www.pse.com.ph
Bloomberg/Thomson Reuters
Technistock & other vendors

Trading participants/ Brokers Other charting software
RECOMMENDED READING:
Technical Analysis from A to Z, , Steven B. Achelis, 1995; 2001 Technical Analysis: Predicting Price Action in the Market, Elli Gifford, 1995
The Visual Investor: How to Spot Market Trends, , John J. Murphy, 1996
Beyond Candlesticks: New Japanese Charting Techniques Revealed, A Wiley Finance Edition, Steve Nison, 1994
CHARTING SOFTWARE & DATA:

Contacting the data provider (Payment required): 1. Go to: http://financemanila.net/forum/
2. Register.
3. Look for the person with the name dragon (administrator of this site). 4. Send Private Message (PM) indicating that you want to subscribe to the End of Day (EOD) data service. For reference mention Joseph Li 5. Pay for the data services, normally emailed mid afternoon.

Obtaining free data (if you have the time to make one). 1. Go to http://www.pse.com.ph/
2. Click Quotation Report (left hand side of the PSE site)
3. Click on the applicable day

4. Cut and paste the data on excel or any software capable of editing.
5. Edit the data in Excel or any software capable of editing the date leaving only the symbol, Volume, High, Low, Open Close fields.
6. Save the data.
7. Upload the data in your favorite charting software.

Recommended charting software: Metastock Version 10.1 (www.equis.com) one-time purchase cost of approximately $500 for the basic program. Add-ons available. Other charting software options: Supercharts
Telechart
Amibroker
GAMBLING VS INVESTING
Opportunity! 80/20 50/50 70/30 60/40
55/45 50/50
lgquinitio@pse.com.ph, leo_quinitio@yahoo.com.ph, mavalino@pse.com.ph
TECHNICAL ANALYSIS
Charting Techniques
by Leo Quinitio
www.pse.com.ph
CHART COMPOSITION Grid

0 100 200 300 400 500 600 700 800 900 1000 |______|______|______|______|______|______|______|______|______|______|______l______l
Convenient for plotting large numbers can plot a great many more years than is possible on a linear scale
Arithmetic grid
Its use would be limited by its lack of detail
Equal line segments represent multiples by a constant factor
1 10 100 1000 |___________________|___________________|__________________| 100 101 102 103
Logarithmic grid
If we were to divide each broad segment into nine segments and let the ticks represent the years from 1 to 10, 10 to 100, and 100 to 1000, this is how it would look:
Each broad segment is subdivided in the same way
100
101
102
103
Each tick within a broad segment represents a multiple of 10 over the corresponding tick in the previous segment. For example, in the segment 100 to 101 the first mark equals 2. In the segment 101 to 102 the first mark equals 20, and in the segment 102 to 103, the first mark equals 200
The uneven spacing is because you are working with the logarithmic function of these actual numbers not the numbers themselves
log (10) = 1.00 log (20) = 1.30 log (30) = 1.48 log (40) = 1.60 log (50) = 1.70 log (60) = 1.78 log (70) = 1.85 log (80) = 1.90 log (90) = 1.95

Similarly the segment between 10 and 30 is equal to that between 30 and 90
Notice that the line segment between 10 and 20 is equal to that between 20 and 40, which is equal to that between 40 and 80
SUMMARY
Comparison of Investment Analyses Chart Composition Chart Types Chart Trend Channels & Lines Chart Patterns & Formations
Definition Advantages & Disadvantages A Study of Market Psychology Basic Assumptions

Origins & Evolution
Chart Indicators & Oscillators

Blending Technical & Fundamental Analyses
Elliot Wave Classical Charting
Technical Reporting

SMA
EMA
WMA
Time series, triangular

variable

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TECHNICAL ANALYSIS

Random Walk Theory

Efficient Market Hypothesis

Efficient Market Hypothesis

INVESTMENT ANALYSIS Fundamental Analysis Technical Analysis

Traditional economic + Business concepts = value of investment

Examination of the above variables is called Valuation process

INVESTMENT ANALYSIS Fundamental Analysis

Best employed for long term investing

Best employed for short term trading

Data utilized come out periodically Tends to focus on a specific sector

Data utilized come out daily

Focused on what must happen

Focused on what happens

VALUATION PROCESS Fundamental Analysis Technical Analysis

Top Down Approach

Considers condition affecting

VALUATION PROCESS Fundamental Analysis Technical Analysis

DONT AIM TO PREDICT PRICES CONSISTENTLY & ACCURATELY

Technical analysis is the answer!?

Technical Analysis will improve investing? Make sensible investment decisions

A chart is a picture A picture is worth a thousand words or probably a thousand dollars

HUMAN ELEMENT Humans are not easily quantifiable nor predictable

The price depends on human expectations

Why Do Prices Fluctuate?

MARKET PSYCHOLOGY THE PRICE IS RIGHT GAME

MARKET PSYCHOLOGY THE PRICE IS RIGHT GAME

MARKET PSYCHOLOGY THE PRICE IS RIGHT GAME

MARKET PSYCHOLOGY MY CHOICE GAME

MARKET PSYCHOLOGY MY CHOICE GAME

MARKET PSYCHOLOGY MY CHOICE GAME

MARKET PSYCHOLOGY MY CHOICE GAME

MARKET PSYCHOLOGY MY CHOICE GAME

PRACTICAL MARKET PSYCHOLOGY

Competitive: buyers raise their bids in order to attract sellers

Emotional: buyers tend to be euphoric when price increases

PRACTICAL MARKET PSYCHOLOGY

Emotional: sellers tend to panic when price drops

More sellers compete to attract buyers

Price becomes too cheap to be ignored by buyers

News of increasing price spreads, price gains momentum

More buyers compete to attract sellers

1. The market discounts everything

2. Price moves in trends 3. History tends to repeat itself

Dow Theory 1890s

Elliot Wave 1938

Ralph Nelson Elliot

The Wave Principle published in 1938

More people join

Below bottom of wave 4

Chart Indicators & Oscillators

CHART COMPOSITION Price Fields

CHART COMPOSITION Price Fields

CHART COMPOSITION Axis

Price range Time line

CHART COMPOSITION Grid Scaling

Arithmetic (or Linear)

CHART COMPOSITION Grid Scaling

CHART COMPOSITION Grid Scaling

Bar Chart Plotting Exercise

Bar Chart Plotting Exercise

Point & Figure Chart

Point & Figure Chart Plotting Exercise