Technical Analysis

INTRODUCTION TO TECHNICAL ANALYSIS

APRIL 15th ,2014BY: Jake Walker

Summary

• Why Should I Care?• What Is Technical Analysis?• Technical V.S. Fundamental Analysis• Market Cycle Model (Types of Trends)• Support/Resistance• Order Types (Market, Limit, Stop)• Example• Resources

Why Should I Care?• Supplements Fundamental

Analysis• Offers Different Perspective• Many Traders use Technical

Analysis in the Short Term• It Can Make Money!

What is Technical Analysis?• A method of evaluating securities

by analyzing statistics generated by market activity, such as past prices and volume.

• Technical analysts do not attempt to measure a security's intrinsic value, but instead use charts and other tools to identify patterns that can suggest future activity.

• http://www.investopedia.com/video/play/fundamental-versus-technical-analysis/

Technical V.S. Fundamental Analysis

Technical V.S. Fundamental Analysis

Market Cycle Model

Trend (Short Term) Example

Support/Resistance

• Support- buying (actual or potential) sufficient in volume to halt a downtrend in prices for an appreciable period

• Resistance- selling (actual or potential) sufficient in volume to satisfy all bids and hence stop prices from going higher for a time

Support/Resistance• A previous high or low is a

potential resistance/support zone

• Support reverses its role to resistance on the way up

• Resistance reverses its role to support on the way down

• Significant at round numbers

Market Orders

• Use a market order to guarantee a fill.

• A market order is the fastest and most reliable way to get in out of a trade.

• A market order is appropriate if getting filled is more important than getting a certain price.

Stop Orders• Use a stop order to

trigger a market or limit order once a specified price has been reached.

• A stop order is appropriate when it is important to confirm the direction of the market before entering a trade.

Limit Orders

• Use a limit order to guarantee a price.

• A limit order allows precise order entry.

• A limit order is appropriate if getting a specific price is more important than getting filled.

Support/Resistance Example

May Comex Silver (Monday April 14th)

May Comex Silver (Tuesday April 15th)

What Should Have Been Done?

• What is the trend?– Primary, Intermediate,

Short-Term?• Where is Support?• Where is Resistance? • What Type of Order

Should be Executed?

Additional Resources

• Barchart.com• Technical Analysis Explained (Pring 5th Edition)

References

• http://samuraitradingacademy.com/fundamental-analysis-vs-technical-analysis/

• Investopedia.com• Technical Analysis Explained (Pring 5th Edition)