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$DEAR BarChart Trader's Cheat Sheet
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Scale Settings for Trend Lines
High points and low points appear to line up better for trend lines when prices are displayed using a semi-log scale. This is especially true when long-term trend lines are being drawn or when there is a large change in price. Most charting programs allow users to set the scale as arithmetic or semi-log. An arithmetic scale displays incremental values (5,10,15,20,25,30) evenly as they move up the y-axis. A $10 movement in price will look the same from $10 to $20 or from $100 to $110. A semi-log scale displays incremental values in percentage terms as they move up the y-axis. A move from $10 to $20 is a 100% gain, and would appear to be a much larger than a move from $100 to $110, which is only a 10% gain.
In the case of EMC, there was a large price change over a long period of time. While there were not any false breaks below the uptrend line on the arithmetic scale, the rate of ascent appears smoother on the semi-log scale. EMC doubled three times in less than two years. On the semi-log scale, the trend line fits all the way up. On the arithmetic scale, three different trend lines were required to keep pace with the advance.
In the case of Amazon.com (AMZN), there were two false breaks above the downtrend line as the stock declined during 2000 and 2001. These false break outs could have led to premature buying as the stock continued to decline after each one. The stock lost 60% of its value three times over a two year period. The semi-log scale reflects the percentage loss evenly, and the downtrend line was never broken.
Daily Candlestick Chart for ROSV
[img]stockcharts.com/c-sc/sc?s=ROSV
$GELV BarChart Trader's Cheat Sheet
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Identification of key support and resistance levels is an essential ingredient to successful technical analysis. Even though it is sometimes difficult to establish exact support and resistance levels, being aware of their existence and location can greatly enhance analysis and forecasting abilities. If a security is approaching an important support level, it can serve as an alert to be extra vigilant in looking for signs of increased buying pressure and a potential reversal. If a security is approaching a resistance level, it can act as an alert to look for signs of increased selling pressure and potential reversal. If a support or resistance level is broken, it signals that the relationship between supply and demand has changed. A resistance breakout signals that demand (bulls) has gained the upper hand and a support break signals that supply (bears) has won the battle.
Daily Candlestick Chart for ASAGF
[img]stockcharts.com/c-sc/sc?s=ASAGF
British Industrial Production: Release Schedule: 8:30 (GMT); monthly, usually 26 working days following the reporting month's end
Revisions Schedule: Monthly revisions made to adjust for incomplete data.
Source of Report: Office for National Statistics (UK)
Web Address: http://www.statistics.gov.uk/default.asp
Address of release: http://www.statistics.gov.uk/statbase/Product.asp?vlnk=6230
$ADVC BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for HALB
[img]stockcharts.com/c-sc/sc?s=HALB
Beige Book: A summary of economic conditions around the United States compiled for the Federal Reserve Board. Each Federal Reserve Bank gathers anecdotal information on current economic condition in its District through reports from Bank and Branch directors and interviews with key businessmen, economists, market experts, and other sources. The Beige Book summarizes this information by District and sector. This report allows outsiders to know what the Fed governors are looking at as they prepare for their upcoming FOMC meeting.
Common Gaps
Sometimes referred to as a trading gap or an area gap, the common gap is usually uneventful. In fact, they can be caused by a stock going ex-dividend when the trading volume is low. These gaps are common (get it?) and usually get filled fairly quickly. "Getting filled" means that the price action at a later time (few days to a few weeks) usually retraces at the least to the last day before the gap. This is also known as closing the gap. Here is a chart of two common gaps that have been filled. Notice that after the gap the prices have come down to at least the beginning of the gap? That is called closing or filling the gap.
A common gap usually appears in a trading range or congestion area, and reinforces the apparent lack of interest in the stock at that time. Many times this is further exacerbated by low trading volume. Being aware of these types of gaps is good, but doubtful that they will produce a trading opportunities.
$BGEM BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for ENTB
[img]stockcharts.com/c-sc/sc?s=ENTB
Binary Options: In finance, binary option (also called fixed return option, all or nothing or digital option)is a type of option where the payoff is either some fixed amount of some asset or nothing at all.[1] Binary options have been available since the middle of 2008. Binary options are trading options that pay out a pre-set and fixed amount if the underlying asset on which the option is based reaches the trader’s selected ‘direction’ (up or down compared with advertised value at the time of purchasing that option) at expiry time.[2]
The Binary Option is a prediction on which way the price of a stock, commodity, index or foreign currency will move by a designated expiration time. Traders can never purchase or own the asset, they can only predict the direction that the asset will go. There are only two possible outcomes and the price of the asset does not matter, all that matters is if the prediction was correct or incorrect.
What is More Important than Why
In his book, The Psychology of Technical Analysis, Tony Plummer paraphrases Oscar Wilde by stating:
Will somebody always buy my stocks when I sell them?
No. If you try to sell more shares than people are willing to buy or if your price is unreasonable, it may take a long time for them to sell, if at all. However, if you use market orders on medium or high volume stocks you should not have any problems selling them immediately.
Daily Candlestick Chart for ATDN
[img]stockcharts.com/c-sc/sc?s=ATDN
$CTSO BarChart Trader's Cheat Sheet
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Bond Auction: A government bond auction is the process of selling short and long-term government bonds to investors in an attempt to minimize the cost of financing national debt.
The process starts with the central bank announcing how much money it intends to borrow. Details like the term length of the bonds and the date of the auction are included in the announcement.
Interested market players like broker-dealers, institutions, and individual investors then submit the amount of bonds that they’re willing to buy and bid at the yield that they want to be paid. Take note that the specific processes of bond auctions are different across countries.
The success of a government bond auction can be measured by the bid-to-cover ratio, a metric that measures how much the total bids exceed the initial amount that the central bank was aiming for.
For example, an auction collects bids worth $100 billion, but the central bank had only aimed for $45 billion. The bid-to-cover ratio is 2.22 ($100/$45). An auction with a bid-to-cover ratio of 2.00 or higher is usually considered as successful.
Traders also look at the change in bond yields after each auction. A higher yield means that investors are demanding a higher price for holding the government bond. Alternatively, a lower bond yield usually signals higher investor confidence and lower borrowing costs for the government (which would make it easier to pay debts).
Daily Candlestick Chart for BUKX
[img]stockcharts.com/c-sc/sc?s=BUKX
EquiVolume boxes put price action and volume together for easy visual analysis. EquiVolume boxes plot the high-low range for length and volume for width. Thin boxes show relatively low volume, while wide boxes show relatively high volume. Square or wide boxes reflect high volume with relatively little price movement. Even with this added volume dimension, chartists can easily spot traditional patterns, support/resistance breaks and reversals.
Bank of Japan (BOJ) Monetary Policy Monthly Report: Release schedule : 6:00 (GMT); in the middle of the month
Revisions schedule : None
Source of report : Bank of Japan
Web Address : http://www.boj.or.jp/en/
Address of release : http://www.boj.or.jp/en/theme/seisaku/handan/gp/index.htm
$RAFLF BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for MMAB
[img]stockcharts.com/c-sc/sc?s=MMAB
Cultural Factors Causing Irrational Exuberance
The news media and new era thinking are among the cultural factors cited by Shiller. Yes, the media seems to keep popping up in the book. Maybe that is why technical analysts only look at price charts!
The speculative bubble was clearly aided and abetted by the news media. Newspapers, television, radio and Internet media compete for public attention. Sensational stories with sound bites are more likely to attract attention than drab analysis with numbers and facts. Despite an inattention to detail, the news media was always there with specific reasons for a stock market move. The media always found the perfect excuse or news event to justify the move - after the fact. It is kind of like a solution in search of a problem.
Robert Shiller notes that news of price changes is influential on investor behavior. In his survey after the crash on October 19th 1987, Shiller listed all the recent news events that seemed relevant and asked respondents to rate the stories. News of the October 14th price decline was also included in this list. At the time, this was the single largest one-day point decline in the Dow Industrials. Surprisingly, the stories relating to the past price declines were deemed the most significant news events. As Shiller states:
Thus it appears that the stock market crash had substantially to do with a psychological feedback loop among the general investing public from price declines to selling and thus to further price declines, along the lines of a negative bubble. The crash apparently had nothing particularly to do with any news story other than that of the crash itself, but rather with theories about other investors' reasons for selling and about their psychology.
New era economic thinking was also cited by Shiller as a cultural factor that contributed to the stock market bubble. New era thinking is not new. Stock market advances in the late 1800s, 1920's and 1960's were also facilitated by new era thinking. At the 1901 peak, new era thinking centered around railroads, big industrial trusts and the age of optimism. The roaring 20's were marked by the electrical age for big cities and the widening use of autos. The 1960's were punctuated by a baby boom, the proliferation of television and low inflation. And finally, the 1990s saw the Internet boom, low inflation, the new economy and the alleged end of the business cycle.
Daily Candlestick Chart for HYSR
[img]stockcharts.com/c-sc/sc?s=HYSR
Intermarket Analysis is a valuable tool for long-term or medium-term analysis. While these intermarket relationships generally work over longer periods of time, they are subject to draw-downs or periods when the relationships do not work. Big events such as the Euro crisis or the US Financial crisis can throw certain relationships out of whack for a few months. Furthermore, the tools shown in this article should be used in conjunction with other technical analysis techniques. The XLY/XLP ratio chart and the Industrial Metals/Bond Ratio chart could be part of a basket of broad market indicators designed to assess the overall strength or weakness of the stock market. One indicator or one relationship should not be used on its own to make a sweeping assessment of market conditions.
Analyst: When analyzing the market, analysts can generally be divided into two camps - fundamentals and technicals.
Fundamental analysts are those who mainly look at the fundamental aspects of an economy in forming their opinions. They stay on top of the markets by reading and analyzing what the current economic data say about current market conditions, what is fundamentally driving the market, and where it's headed.
Technical analysts are those who primarily rely on chart indicators and patterns to help predict where price will move next. Some tools that technical analysts use are Fibonacci retracement, candlesticks and momentum indicators.
Daily Candlestick Chart for VKML
[img]stockcharts.com/c-sc/sc?s=VKML
Assessing Management before Investing
In order to execute a business plan, a company requires top-quality management. Investors might look at management to assess their capabilities, strengths and weaknesses. Even the best-laid plans in the most dynamic industries can go to waste with bad management (AMD in semiconductors). Alternatively, even strong management can make for extraordinary success in a mature industry (Alcoa in aluminum). Some of the questions to ask might include: How talented is the management team? Do they have a track record? How long have they worked together? Can management deliver on its promises? If management is a problem, it is sometimes best to move on.
An Oldie but Goodie
Much of our understanding of chart patterns can be attributed to the work of Richard Schabacker. His 1932 classic, Technical Analysis and Stock Market Profits, laid the foundations for modern pattern analysis. In Technical Analysis of Stock Trends (1948), Edwards and Magee credit Schabacker for most of the concepts put forth in the first part of their book. We would also like to acknowledge Messrs. Schabacker, Edwards and Magee, and John Murphy as the driving forces behind these articles and our understanding of chart patterns.
Pattern analysis may seem straightforward, but it is by no means an easy task. Schabacker states:
The science of chart reading, however, is not as easy as the mere memorizing of certain patterns and pictures and recalling what they generally forecast. Any general stock chart is a combination of countless different patterns and its accurate analysis depends upon constant study, long experience and knowledge of all the fine points, both technical and fundamental, and, above all, the ability to weigh opposing indications against each other, to appraise the entire picture in the light of its most minute and composite details as well as in the recognition of any certain and memorized formula.
Even though Schabacker refers to "the science of chart reading", technical analysis can at times be less science and more art. In addition, pattern recognition can be open to interpretation, which can be subject to personal biases. To defend against biases and confirm pattern interpretations, other aspects of technical analysis should be employed to verify or refute the conclusions drawn. While many patterns may seem similar in nature, no two patterns are exactly alike. False breakouts, bogus reads and exceptions to the rule are all part of the ongoing education.
Careful and constant study are required for successful chart analysis. On the AMZN chart above, the stock broke resistance from a head and shoulders reversal. While the trend is now bearish, analysis must continue to confirm the bearish trend.
Novellus Systems, Inc. (NVLS) chart patterns example chart from StockCharts.com
Novellus (NVLS)[Nvls]
Some analysts might have labeled the NVLS chart as a head and shoulders pattern with neckline support around 17.50. Whether or not this is robust remains open to debate. Even though the stock broke neckline support at 17.50, it repeatedly moved back above its support break. This refusal might have been taken as a sign of strength and justified a reassessment of the pattern.
Daily Candlestick Chart for XTGR
[img]stockcharts.com/c-sc/sc?s=XTGR
$PFNO BarChart Trader's Cheat Sheet
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Biflation: Biflation is a phenomenon where both inflation and deflation occur at the same time. This term was coined by Dr. Osborne Brown, a Senior Financial Analyst for the Phoenix Investment group.
During biflation, the prices of commodities and earnings-based assets (equities) rise while the prices of debt-based assets (bonds) fall
Daily Candlestick Chart for TNEN
[img]stockcharts.com/c-sc/sc?s=TNEN
$ABCP BarChart Trader's Cheat Sheet
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Daily Candlestick Chart for WCYN
[img]stockcharts.com/c-sc/sc?s=WCYN
Spacing of Points
The lows used to form an uptrend line and the highs used to form a downtrend line should not be too far apart, or too close together. The most suitable distance apart will depend on the time frame, the degree of price movement, and personal preferences. If the lows (highs) are too close together, the validity of the reaction low (high) may be in question. If the lows are too far apart, the relationship between the two points could be suspect. An ideal trend line is made up of relatively evenly spaced lows (or highs). The trend line in the above MSFT example represents well-spaced low points.
On the Wal-Mart (WMT) example, the second high point appears to be too close to the first high point for a valid trend line; however, it would be feasible to draw a trend line beginning at point 2 and extending down to the February reaction high.
Amplification Mechanisms
Lately there has been a change in investor attitudes towards stocks. By the late 1990's stocks were considered a long-term investment that could not go wrong. Jeremy Siegel first published Stocks for the Long Run in 1994. Subsequent editions have appeared in 1998, 2002 and 2007. Stocks indeed performed well from 1995 until 2000, when the S
Convergence: Normally, the contract price of a futures contract is higher than the current price of the underlying asset (normally a commodity). The futures contract price is higher because of the effect of the time value of money. As the expiration date nears, the spread between the spot price and the futures contracts price becomes smaller and smaller. On the delivery date of the contract, the futures and spot prices should be equal.
This process of futures and spot prices approaching one another is called convergence
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Investor Hub Alerts: Sign up for 'STOCKGOODIES PLAYS OF THE WEEK ' E-Mail List UPDATE; 5-1-22 courtesy of charting /\ wit tweezer top calls /\ Tony @Montana_Trades Really good study sheet on Candlestick Patterns [-chart]pbs.twimg.com/media/FRn8188XMAAdZvk?format=jpg&name=small[/chart]
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