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Technical Analysis
• Technical analysis is the study of market timing or
market action. By reviewing past price movement,
technical analysis uses charting systems and
mathematically-drawn trend indicators to forecast
future price reactions. Thus by evaluating price
swings and patterns, one can make an educated
assumption as to whether the share price of a stock
was headed for a profitable gain or loss within a
short term perspective. The foundation of technical
analysis lies in its use of charted trends, the general
direction of either the overall market or the price of
an asset.
J.G. Barredo
Technical Analysis vs Fundamental Analysis
CHART BASICS
Basic Terms
• Volatility
• Fluctuations
• 52-week high / low
• Price / trading range
• Open / closing price
Charts
• Maps price performance
• “investment roadmap”
• Price / volume
relationship important
Chart Types - Line Charts
• Most basic of all charts
• No trading range
Chart Types – Bar Chart
• Vertical line represents highs/lows of the day
• Horizontal line represents closing price
• Red = down
• Blue/Black = up
Daily High
Closing Price
Daily Low Price Gap
Chart Types – Candlestick Charts
• Vertical line represents the
trading range
• Wide bar represents open
and close
• White bar – Up and closes
above opening price
• Red Bar – down
• Black bar – up, but closes
below the opening price
Chart Basics – Time Scale
• Time Scale
– Dates along bottom of chart (varies from
seconds to decades)
• Price movements
more significant when
volume is above
average
Price and Volume
Average
Volume
Trends are your Friends
• Trend: general direction of stock
• Uptrend: higher highs, higher lows
Sometimes, trends difficult to see
Trendlines
• Upward trendline,
connecting the lows,
represents support
Channels
• Two parallel trend lines that act as areas of
support and resistance
• Any break through the channel is a break of the
trend, otherwise the price should stay in range
Technical Analysis: Introduction to Stock Charts
BASIC CONCEPTS
Support and Resistance